bcg matrix-market growth share matrix
DESCRIPTION
Concept of BCG matrix and explanation of different terms related to it along with example.TRANSCRIPT
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BCG Matrix
PRESENTED BY: NAVNEET KUMAR DWIVEDI
BALAJI INSTITUTE OF MODERN MANAGEMENT, PUNE
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Contents of Presentation
Concept of BCG matrix
and explanation of
different terms related to
it along with example.
Introduction
Terms in BCG
BCG Matrix- Question
Mark
BCG Matrix- Star
BCG Matrix- Cash Cow
BCG Matrix- Dog
Conclusion
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Introduction
• Developed by Bruce Henderson of the Boston Consulting
Group in the early 1970’s
• Matrix is a portfolio planning model
• Classifying companies into categories based on
combinations of market growth and market share
• Maps the business unit positions within these two important determinants of profitability
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Assumptions
• An increase in relative market share will result in an increase
in the generation of cash
• A growing market requires investment in assets to increase capacity and therefore results in the consumption of cash
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Terms
• Market Share/Relative Market Share
Market share is the percentage of the
total market that is being serviced by your
company measured either in the revenue terms
or unit volume terms.
• Market Growth Rate
Rate at which market share of company
grows year on year
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BCG Matrix
Portfolio planning model which is
based on the observation that
company’s business unit can be
classified in to four categories .
• Question Marks
• Stars
• Cash cows
• Dogs
It is based on the combination of market growth & market share
relative to the next based competitor.
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BCG Matrix…
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BCG Matrix- Question Mark
• Most business start of as question marks
• They will absorb great amount of cash if
the market share remains unchanged
(low)
• Question marks have potential to
become a star & eventually a cash
cow but can also become dog
• Investment should be high for question
marks.
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BCG Matrix- Star
• Stars are leader in business
• They also require heavy investment to
maintain it’s large market share.
• It leads to large amount of cash
consumption & cash generation.
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BCG Matrix- Cash Cow
• They are foundation of the
company & often the stars of
yesterday.
• They generate more cash than
required.
• They require less of resources
- Monetary & Human Resource
• They are located in an industry that
is mature not growing or declining
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BCG Matrix- Dog
• Dogs are the cash traps
• Dogs do not have potential to bring
• High cost – Low quality
• Business is situated at a declining
stage
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Conclusion
Benefits
• BCG matrix is simple & easy to understand
• It helps to quickly & simply screen the opportunity open to you,
& help you think about how you can make the most of them
• It is used to identify how corporate cash resources can best be
used to maximize company’s future growth & profitability
Limitations
• BCG matrix uses only two dimensions relative market share &
market growth rate
• Problem of getting data on market share & market growth
• High market share does not mean profits all time
• Business with market share can be profitable too
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Questions?