BCG and Ge Matrix
BCG and Ge Matrix
BCG and Ge Matrix
INTRODUCTION
Boston Consulting Group (BCG)
The BCG Matrix was developed by Bruce
Henderson founder of the Boston
Consulting Group in the early 1970s.
According to this technique, Business or
Products are classified as LOW or HIGH
performance depending upon their
market growth and relative market share.
Market Share and Market
Growth
To understand the Boston
Matrix you need to
understand how market
share and market growth are
interrelated.
Market Share meaning
A percentage of total sales volume in
a market captured by a brand, product,
or company.
EXAMPLE: Lets assume XYZ company sells over
50 Crore a year in widgets. If the total amount
of widgets in the entire market totals 100 Crore,
then the company has a market share equal to
50%.
Market Growth meaning
An increase in the demand for a
particular product or service over time.
Market Growth can be slow if consumers, if
consumers find the product or service useful for
the price level.
Example: A new technology might only
be marketable to a small set of consumers, but as
the price of the technology decreases and its
usefulness in everyday life increases, more
consumers could increase demand.
Relative Market Share
RMS=
Business Unit Sales This Year / Leading
Rivals Sales This Year
The higher your market share, the higher
proportion of the market you control
The BCG Growth-Share Matrix
It is a Portfolio Planning
Model which is based on the
observation that a
companys business units
can be classified into 4
categories:
1. Stars
2. Question Marks
3. Cash Cows
4. Dogs
BCG MATRIX
STARS
High Growth, High Market Share
Stars are leaders in business.
They also require heavy investment, to
maintain its large market share.
It leads to large amount of cash
consumption and cash generation.
Attempts should be made to hold the
market share otherwise the star will
become a CASH COW.
CASH COWS
Low growth, High Market Share
They are the foundation of the company
and often the stars of yesterday.
They generate more cash than required.
They extract the profits by investing as
little cash as possible.
They are located in an industry that is not
mature, not growing or declining.
DOGS
Low growth, Low market share
Dogs are the cash traps.
Dogs do not have potential to bring in
much cash.
Number of DOGS in the company should
be minimized.
Business is situated at a declining stage.
QUESTION MARKS
High growth, Low market share
Most businesses start of as question marks.
They will absorb large amount of cash if
the market share remains unchanged(if it
remains low).
Why Question Marks?
Question marks have potential to become
STAR and eventually CASH COW but can
also become a DOG.
Investments should be high for question
marks.
WHY BCG MATRIX?
To assess:
Profiles of Products/Businesses
The cash demands of products
The development cycles of products
BENEFITS
BCG matrix is simple and easy to
understand.
It helps you to quickly and simply screen
the opportunities open to you, and helps
you to think about how you can make the
most of them.
It is used to identify how Corporate Cash
Resources can be best used to maximize
a companys future growth and
profitability.
LIMITATIONS
BCG Matrix uses only two dimensions,
Relative Market Share and Market Growth
Rate.
High Market Share does not mean Profits
all the time.
Business with Low Market Share can be
profitable too.