The bcg matrix is a tool to evaluate the products of a company, and thereby help to decide where the companys resources can best be allocated to maximize profits in the future. Gemckinsey matrix brief history in the late sixties and early seventies, while the boston consulting group were devising the bcg or growth share matrix, general electric, a leading corporation in the united states, were also looking at concepts and techniques for strategic planning. So if samsung has a 20 percent market share in the mobile phone industry and apple. The bcg matrix provides some assumptions as follows bcg website market share can be achieved by the. It is a matrix which helps in decision making and investments. Table 1 indicates how a business could have a negative growth rate calculated on. May, 2018 bcg matrix is the term used in the context of management. The bcg matrix can roughly judge enterprises overall operating conditions, but the product life cycle only reflects the market per formance of a single product. In this article, we analyze products, but the bcg matrix can also be used to evaluate individual business units called strategic business units sbus or any other cashgenerating assets, such as property. The bcg matrix is an excellent tool for analyzing the products or services of a company.
The bcg matrix provides som e assumptions as follows bcg website. The boston matrix is a model which helps businesses analyse their portfolio of businesses and brands. Boston matrix product portfolio model business tutor2u. The bcg matrix also known as the boston consulting group analysis, the growthshare matrix, the boston box or product portfolio matrix is a tool used in corporate strategy to analyse business units or product lines based on two variables. Bcg growthshare matrix strategic management insight. Bcg matrix explained smi strategic management insight. Some of the other analytic tools will also be mentioned in this work. Intellectual critique morrison and wensley 1991 found that the bcg matrix set a standard for strategic models, and that a plethora of similar matrix style models came about in the years after the bcg matrix was introduced wind, mahajan, and swire, 1983. This is possible only if a negative dimension is added to the matrix. Bcg vaccine can be administered after birth intradermally.
A business becomes a cash cow or a dog depending on its performance in the growth stage. Bcg stands for boston consulting group, a wellknown consultancy company that developed the bcg matrix in the 1970s. The creator of the bcg matrix used this variable to actually measure a companys competitiveness. The paper describes and explains the bcg portfolio matrix model, applying the model to several divisions of a small liberal arts university. A portfolio of products can be analysed using the boston group consulting matrix. Bcg matrix model advantage boston matrix explained.
Explain briefly with the help of two examples of each strengths are attributes of the organization that are helpful to the achievement of the objective. Market share can be achieved by the inv estment in marketing sector. Each quadrant has a name and specific characteristics. The bcg matrix, developed by the boston consulting group, a leading management consulting firm, is the best known of these methods. Space matrix strategic position and action evaluation 3. The main use of bcg is for vaccination against tuberculosis. Market growth are the numbers of potential customers in the market growing or not.
Understanding cash flow is key to making the most of the bcg matrix. Jan 16, 2020 the bcg growthshare matrix is a tool used internally by management to assess the current state of value of a firms units or product lines. Bcg matrix is a tool used by companies to evaluate their product portfolio and business units for the purpose of developing effective business strategy. How to use the bcg matrix smart insights digital marketing. May 02, 20 mis 4478 team bazinga presentation of bcg matrix. The matrix was intended to help corporations analyze their business and product lines to better understand where to allocate resources. In 1968, bcg founder bruce henderson noted that four rules are responsible for product.
Created by the boston consulting group, the bcg matrix also known as the boston or growth share matrix provides a framework for analyzing products according to growth and market share. One of the more obvious benefits of the bcg matrix is its level of simplicity in that it only has two dimensions and four quadrants and its easy ability to recall continue reading limitations of the bcg matrix. The categories were all given remarkable names cash cows, stars, dogs. At the height of its success, the growth share matrix was used by about half of all fortune 500 companies. To ensure longterm value creation, a company should have a portfolio of products that contains both highgrowth products in need of cash inputs and lowgrowth products that generate a lot of cash. The matrix will highlight what products are considered dogs therefore you should remove all marketing budget. In developing the growthshare matrix, the boston consulting group bcg created arguably the most popular management technique ever day, 1981, with other models such as the shell directional policy matrix being developed later shell, 1975. Twos matrix threatsopportunitiesweaknessesstrengths 2. An analysis on bcg growth sharing matrix munich personal. Mar 15, 20 situational analysis, business strategy and bcg matrix 1. The ie matrix is a strategic management tool which is used to analyze the current position of the divisions and suggest the strategies for the future. It provides a graphic representation for an organization to examine different businesses in its portfolio on the basis of their related market share and industry growth rates.
The growth share matrix or product portfolio boston. The composition of the portfolio can be critical tothe growth and success of the company. Under the growth share matrix model, a business can either become a cash cow if it becomes a market leader in the industry or a dog, which represents a low market share and a low growth. Along with that i share how the bcg matrix can be used in digital marketing quite intuitively using my personal example of facebook advertis. Full form of bcg matrix is boston consulting group matrix. So if samsung has a 20 percent market share in the mobile phone industry and apple its largest competitor has 60 percent so to speak.
The boston matrix is a popular tool used in marketing and business strategy. Which unit will be chosen will have an impact on the whole analysis. Bcg matrix is a framework created by boston consulting group to evaluate the strategic position of the business brand portfolio and its potential. Situational analysis, business strategy and bcg matrix. Bcg vaccination can cause a false positive mantoux test, although a very highgrade reading is usually due to active disease. A cash cow is a term used in the boston consulting group bcg matrix. Bcg matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. A product or business with low market share in a mature industry is a dog. Bcg matrix advantages and disadvantages letslearnfinance. However, you can also use the model to determine the priority for other matters within a company. The bcg matrix what is it and how to use it super heuristics. The growth share matrix is a diagram of the normal relationship of cash use and cash genera tion. Because of its flexibility in this area, the bcg matrix.
Dec 16, 2017 bcg matrix in the marketing strategy of kfc its hot wings, sandwiches and grilled chicken are stars since majority of its sales comes from these menu items. Apr 02, 2017 the difference between the bcg matrix and the product life cycle 2. Benefits of the bcg matrix the marketing study guide. Boston consulting group matrix bcg this technique is particularly useful for multidivisional or multiproduct companies. Evaluating product lines using the bcg matrix youtube. The paper concludes by discussing the negative impact of following not. The principle behind the technique is to provide a visual image. Although the bcg matrix is widely used and widely discussed in many strategy and marketing textbooks, it does carry significant practical limitations. Bcg matrix has four types of scenarios with respect to the market share of the company, cash flow generation and growth rate of the industry in which company is operating. Sep 10, 2018 the bcg matrix what is it and how to use it in this article, i explain the bcg matrix with an example of the iim udaipur alumnus and serial entrepreneur, angad abrol. Strategies for hospital leadership identifying strengths. Mgt603 strategic management solved mcq and subjective. Bcg matrix is developed by bruce henderson of the boston consulting group in the year of 1968 bcg, 2012.
The content of this report will explain and analyse the application of bcg matrix with some examples. It divides a market on the basis of its relative growth rate and market share and comes up with 4 quadrants cash cow, stars, question marks and dogs. It is very simple to use and explain, as there are only two dimensions and four quadrants it is a reputable and longstanding strategic model that has proved to be robust over time and significant changes in the competitive environment. Bcg stand for boston consulting group and this model was developed by boston consulting group in early 1970s to facilitate the organizations for managing their product and business portfolio. Bcg growth share matrix definition, explanation, examples. The growth share matrix was created in 1968 by bcgs founder, bruce henderson. The bcg matrix is a tool used in corporate strategy to analyse sbus or product lines based on two variables. The bcg matrix is used in marketing strategies to identify where to invest marketing budgets. The bcg matrix is a wellknown management model for analyzing a companys product portfolio. It was published in one of bcgs short, provocative essays, called perspectives. Reeves martin, senior partner and managing director of the boston consulting group, said that nearly 50 years after its inception, the bcg matrix.
This is also known as the growth market share matrix. Strategies for hospital leadership identifying strengths, allocating hospital resources and focusing on profitable niche leadership page 2 boston consulting group matrix the hospital leadership should combine the mix of looking at the business lines through the bcg matrix, and also assess such questions as porter would set forth. May 18, 2014 the internalexternal ie matrix positions an organizations various divisions in a nine cell matrix. Therefore, it is essential to define the unit for which youll do the analysis. The bcg matrix is based on the classification of sbus into question marks, stars cash.
The most controversial aspect of bcg is the variable efficacy found in different clinical trials, which appears to depend on geography. It divides products into four categories based on their market share and market growth. Bcg matrix can be used to analyze sbus, separate brands, products or a firm as a unit itself. The bcg matrix was created for the boston consulting group by bruce henderson in 1968. It is the most renowned corporate portfolio analysis tool. Bcg matrix was a framework originally devised by boston consulting group to strategically measure the potential growth rate of a company within its industry versus its relative market share. For example, you can analyze your customer portfolio using the bcg matrix. It is argued that relative competitive position and growth are the two fundamental parameters which must be considered in. However, this is where the intellectual contribution of the bcg matrix ends, they argue. There is no room for growth, which suggests that no new funds should be invested in it. It classifies business portfolio into four categories based on industry attractiveness growth rate of that industry and competitive position relative market share. The boston consulting group bcg is a renowned organization.
The exact measure for relative market share is the focal companys share relative to its largest competitor. The divisions or products compromise the organisations business portfolio. The bcg matrix considers two variables, namely n market growth. The bcg matrix, also known as the boston growthshare matrix, is a tool to assess a companys current product portfolio. Strategic position and the action evaluation of space matrix answer page 100. Boston matrix bcg matrix at the end of the 1960s, bruce henderson, founder of the boston consulting group, bcg, developed his portfolio matrix. Pdf an analysis on bcg growth sharing matrix researchgate. The bcg matrix explained how does the bcg matrix work. Copying and distribution of this pdf is prohibited without written permission. The extension of the bcg matrix the extension of bcg matrix can only be undertaken provided a new dimension is added to the traditional model. The bcg method can help understand a frequently made strategy mistake. This categorises the products into one of four different areas, based on. The bcg matrix provides some assumptions as follows bcg, website. These describe businesses that have low market shares in slow growth markets.
Limitations of the bcg matrix the marketing study guide. The boston consulting group matrix provides the recommendations for the development of strategic resource allocation and strategy development in the typical multibusiness company. Array of methodologies for analyzing internal and external environment of a business. Presented by pinak paul, tanuja mallick, jyoti dudeja, ayushi singla presented to. Boston consulting group bcg matrix is a four celled matrix a 2 2 matrix developed by bcg, usa. The difference between the bcg matrix and the product life cycle 3. The bcg matrix is a matrix designed by the boston consulting group back in 1970s. Pdf bcg matrix, swot analysis and porter model sidhant.
The boston consulting groups product portfolio matrix, also known as the bcg matrix or bcg growthshare matrix, was developed by the boston consulting groups bruce d. It will help identify which products to promote to gain more market share. Oct 14, 2019 bcg matrix can be used to analyse business units, separate brands, products or a firm as a unit itself. Based on this assessment, the boston matrix helps in the longterm strategic planning of the companys portfolio, as it indicates where to invest, to discontinue or develop products.
Market share gains will always create cash surpluses. Bcg matrix boston matrix strategy training from epm. The bcg model is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. Using the boston consulting group portfolio matrix to analyze. The bcg matix contains the following four components. Market share does the product being sold have a low or high market share. Bcg matrix is used together with other strategic analysis methods in the process of substantiation. Using the boston consulting group portfolio matrix to.
An incorrectly defined market can lead to a poor classification of products. The m atrix is established in 1970 by bruce d oolin henderson 1915 1992 for the bcg in boston. Bcg vaccination can cause a false positive mantoux test, although a very highgrade reading is usually due to active disease the most controversial aspect of bcg is the variable efficacy found in different clinical trials, which appears to depend on geography. Bcg model puts each of a firms businesses into one of four categories. May 01, 20 bcg matrix is a framework created by boston consulting group to evaluate the strategic position of the business brand portfolio and its potential. This is also known as the growth market share matrix by plotting these factors it is possible to identify which products or brandsunits a company should invest further in, and which products it. A business with a range of products has a portfolio of products.
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