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BCG Matrix Assignment 1

The BCG matrix is a tool that classifies products and business units based on their market share and market growth rate. It divides offerings into four categories: stars, cash cows, question marks, and dogs. For Unilever Pakistan, brands like Fair & Lovely and Walls are stars with high market share and growth that require continued investment. Glaxose-D and Ponds are cash cows with high market share but low growth, generating profits. Question marks like Close-up have potential but need investment to increase their share. Dogs like Signal toothpaste are declining products that provide little future value.

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817 views

BCG Matrix Assignment 1

The BCG matrix is a tool that classifies products and business units based on their market share and market growth rate. It divides offerings into four categories: stars, cash cows, question marks, and dogs. For Unilever Pakistan, brands like Fair & Lovely and Walls are stars with high market share and growth that require continued investment. Glaxose-D and Ponds are cash cows with high market share but low growth, generating profits. Question marks like Close-up have potential but need investment to increase their share. Dogs like Signal toothpaste are declining products that provide little future value.

Uploaded by

Raja Abdullah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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SUBMITTED TO:

Ms. Hina Hayat

SUBMITTED BY:
Abdullah Anees

TOPIC:
BCG Matrix

BCG Matrix:
Definition:
The Boston Consulting Group (BCG) growth-share matrix is a planning tool
that uses graphical representations of a company’s products and services in
an effort to help the company decide what it should keep, sell, or invest more
in.
The matrix plots a company’s offerings in a four-square matrix, with the y-
axis representing the rate of market growth and the x-axis representing
market share. It was developed by the Boston Consulting Group in 1970.
Understanding the tool:
BCG Matrix is a 4 quadrant model where the x-axis is the market share or
relative market share of your product, service or investment and the y-axis is
the market growth rate.

Relative Market Share: One of the dimensions used to evaluate business


portfolio is relative market share. Higher corporate’s market share results in
higher cash returns. This is because a firm that produces more, benefits from
higher economies of scale and experience curve, which results in higher
profits. Nonetheless, it is worth to note that some firms may experience the
same benefits with lower production outputs and lower market share.

Market Growth rate: High market growth rate means higher earnings and
sometimes profits but it is also consumes lots of cash, which is used as
investments to stimulate further growth. Therefore, business units that
operate in rapid growth industries are cash users and are worth investing in
only when they are expected to grow or maintain market share in the future.

There are four quadrants into which brands are classified:


 Dogs:
Business units in a slow-growth or declining market with a small relative
market share are considered Dogs. These units typically break even (they
neither create nor consume a large amount of cash) and generate barely
enough cash to maintain the business’s market share. These businesses are
therefore not so interesting for investors. Since there is still money involved
in these business units that could be used in units with more potential, Dogs
are likely to be divested or liquidated.
 Cash Cows:
Cash cows are the most profitable brands and should be “milked” to provide
as much cash as possible. The cash gained from “cows” should be invested
into stars to support their further growth. According to growth-share matrix,
corporates should not invest into cash cows to induce growth but only to
support them so they can maintain their current market share. Again, this is
not always the truth. Cash cows are usually large corporations or SBUs that
are capable of innovating new products or processes, which may become new
stars. If there would be no support for cash cows, they would not be capable
of such innovations.
 Stars:
Stars have a high market share and a high growth rate. They can generate
some profit, however, growth is at the expense of money and these are cash
consuming. The hope is that eventually the stars will be transformed into cash
cows.
Strategic choices: Vertical integration, horizontal integration, market
penetration, market development, product development.
 Question marks:
Question Marks (or Problem Children) are businesses operating with a low
market share in a high growth market. They have the potential to gain market
share and become Stars (market leaders) eventually.  Question marks do not
always succeed and even after large amount of investments they struggle to
gain market share and eventually become dogs. Therefore, they require very
close consideration to decide if they are worth investing in or not.

BCG Matrix Advantages:


The advantages of the Boston Matrix includes:

 It provides a high-level way to see the opportunities for each product in


your portfolio.

 It enables you to think about how to allocate your limited resources to


the portfolio so that profit is maximized over the long-term.

 It shows if your portfolio is balanced. For example, if you have too few
products in your portfolio then you could be in the dangerous position of
having all your eggs in one basket.

 The tool is very simple to use and understand.

BCG Matrix Disadvantages:


The disadvantages of the Boston Matrix include:
 Market growth rate is not an accurate measure of a market’s
attractiveness to a business.

 Market share doesn’t actually predict how much cash a product


generates. For example, dogs can be profitable, and stars can have a
high market share and high growth but be operating in an extremely
low margin industry and therefore never be particularly profitable.

 It is only a snapshot of the current situation. It doesn’t look to see what


is likely to happen to a market in the future.

Unilever Pakistan Limited:


The Unilever Pakistan Limited (UPL), formerly Lever Brothers Pakistan
Limited was established in Pakistan in 1948. The town of Rahim Yar
Khan was the site chosen for setting up a vegetable oil factory. Unilever
Pakistan is the largest fast-moving consumer goods (FMCG) company in
Pakistan, as well as one of the largest multinationals operating in the country.
Now operating six factories at different locations around the country. The
Unilever's head office was shifted to Karachi from the Rahim Yar Khan site
in the mid 1960s.
Unilever’s Star (HIGH Market Share, HIGH Market Growth)

• The brands mentioned under Star Category in above matrix are the brands at
their best, holding a large market share in a very growing market–while
needing continued investment to maintain and improve their position, as
rivals are constantly entering the market and innovating.

• For Unilever, Fair & Lovely, Walls , Rafhan and Sunsilk are the leading
brands in Pakistan. Given its current status, continued investment remains a
prerequisite for these brands to maintain a large market share that is
undoubtedly capable of capturing high market growth.

Unilever’s Cash Cow (HIGH Market Share, LOW Market Growth):

• These are yesterday’s top products in industries that have since reached
saturation.

• This is probably the most important group of products for businesses like
Unilever, because they need very little additional investment to generate
revenue–enabling profits to be reinvested in Stars and Problem Child
(Question Marks) brands. Among others, Glaxose-D, Ponds, and Lipton are
Unilever's main cash cows with profits not just keeping their own but also
harboring Stars and question marks as well.

Unilever’s Question marks (LOW Market Share, HIGH Market


Growth):

• They can be described as the bread-winners of tomorrow (Stars). Many


relatively young companies are still in the process of exploiting their value
within the industry and therefore need the greatest investment from the
success of Cash Cow brands in order to exploit quick market growth ahead of
competitors.

• Excessive revenues from products such as Surf Excel, Lux, Knorr,


Lipton, Ponds have been reinvested to reinforce brands such as Clear, Dox,
Close-up by Unilever.
Unilever’s Dog (LOW Market Share, LOW Market Growth):

 These are dead-end products whose time has elapsed and most likely offer
no future profits. The waste of resources produced by Star and Cash Cow
brands is simply keeping them on the market.
 In Dogs quadrant Signal Toothpaste, Rexona Deodorant Supreme Tea,
Lifebuoy shampoo. They may generate enough cash to maintain
themselves, but do not have much future.

The aim is:


“Sell the dogs to fund the question marks-
And try to transform the cows into stars-
before they turn into dogs.”

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