BCG

The Boston
Consulting
Groups
Growth-Share
Matrix
Presented by:
Dr Abdalla Sobhy
Presentation Outline
History of BCG Matrix
Brief explanation of portfolio analysis
BCG Matrix construction
Strategy recommendations
Evaluation of the tool

History of the BCG Matrix
created by Bruce Henderson
First implementation in 1969 by
Boston Consulting Group
Has many names B-Box, B.C.G.
analysis, BCG-matrix, Boston
Box

Basis of the BCG Portfolio Matrix
Time
Introductory Phase
?
Growth Phase
Star
S
a
l
e
s

V
o
l
u
m
e

Mature Phase Cash
Cow
Decline Phase
Dog
BCG Matrix Construction
Internal measure: Relative market share
External measure: Market growth

BCG Matrix Format
Vertical Axis = Relative Market Growth
Split at 10% by a horizontal line
Horizontal Axis = Relative Market Share
Split at 1x by a vertical line
Creates four quadrants in which individual SBUs are
positioned as bubbles
Bubble size = SBUs total revenue

20%-
18%-
16%-
14%-
12%-
10%-
8%-
6%-
4%-
2%-
0
M
a
r
k
e
t

G
r
o
w
t
h

R
a
t
e

10x 4x 2x 1.5x 1x
Relative Market Share
.5x .4x .3x .2x .1x
Dogs
8
7
3
?
Question marks
?
2
1
Cash cows
6
Stars
5
4
The BCG Matrix
High Low
High
Low
Product
Sales
Growth
Rate
Relative Market Share
Cash Cow
business units with high market share in
a slow-growing industry.
generate cash in excess of the amount
of cash needed to maintain the
business.
They are to be "milked" continuously
with as little investment as possible,
since such investment would be wasted
in an industry with low growth.
Star Strategies
Business units with a high market share in a
fast-growing industry.
The hope is that stars become the next cash
cows.
Sustaining the business unit's market
leadership may require extra cash, but this is
worthwhile if that's what it takes for the unit
to remain a leader.
When growth slows, if they have been able
to maintain their category leadership stars
become cash cows, else they
become dogs due to low relative market
share.
Problem Child or ?
Low market share in expanding industry
Needs substantial cash to improve its position
A question mark has the potential to gain market
share and become a star, and eventually a cash
cow when the market growth slows.
If the question mark does not succeed in
becoming the market leader, then after perhaps
years of cash consumption it will degenerate into
a dog when the market growth declines.
Question marks must be analyzed carefully in
order to determine whether they are worth the
investment required to grow market share.
Dogs or pets
Low market share in a mature or
declining industry
Slow progress on experience curve
(barely enough cash to maintain
the business's market share
Cost disadvantages and few growth
opportunities
should be sold off.
Concentrate on niches requiring
limited effort
Strategy Recommendations
Investment
Further Growth
Maintain Market Position
Cash flow
Self-sustaining: Fund their own growth
Require funds from other SBUs (Cash Cows)
Assure the future of the company
Grow into Cash Cows


Strategy Recommendations
Investment
Increase market share
Selectively develop into Stars
Cash Flow
Require funds from other SBUs (Cash Cows)
Unrealized future opportunities
Strategy Recommendations
Investment
Maintain market share
Maintain capacity
Cash Flow
Positive cash flow
Provides funding to support Stars and ?
No potential for profit growth


Strategy Recommendations
Investment
Reduce capacity to free up resources
Cash Flow
Goal of Positive Cash Flow
Negative Cash Flow = burn
No real growth opportunities

Evaluation of BCG Matrix:
Cons
Oversimplifies complex decisions
Only 2 factors considered = creates risk
Uncertainty in market and SBU definition
Only considers current businesses no dynamics
Does not recognize possible synergies between
SBUs
Can fall prey to the GIGO syndrome
Evaluation of BCG Matrix: Pros
Simple and rapid
Solid basis for decision-making
Good measurability of market share and
growth
Provides information about efficient
resource allocation within the
organization
Generator for strategic options