BCG Matrix : Boston Consulting Group
The BCG Matrix was created by the The Boston Consulting Group (BCG) and it became on of the most well-known portfolio management Decision Making Tools in the early 1970's. It is based on the product life cycle theory, and it is used to prioritize the product portfolio in a company or department. There are two dimensions - market share and market growth. According to this technique, businesses or products are classified as low or high performers depending upon their market growth rate and relative market share.

•         Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms.

•         RELATIVE MARKET SHARE ( RMS) =   (Business unit sales this year/ Leading rival sales this year)

•         The higher your market share, the higher proportion of the market you control.

•      Market growth is used as a measure of a market’s attractiveness.

•      MGR = (Individual sales  this year-  individual sales last year)/ Individual sales last year  
•      Markets experiencing high growth are ones where the total market share available is expanding, and there’s plenty of opportunity for everyone to make money.

It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories:

Stars : High Growth -High Share
  • It is based on the combination of  market growth and market share relative to the next best competitor.
  • 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 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 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 great amounts of cash if the market share remains unchanged, (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.

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