4.BCG Matrix

BCG MATRIX
Boston Consulting Group (BCG)
 Matrix is developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s
 According to this technique, business or products are classified as low or high performance
depending upon their market growth rate & relative market share.
Relative market share & market growth
 To understand the Boston Matrix you need to understand how market share & market growth
interrelated.
 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.
Relative market share
Business Unit Sales this year
RMS :-
Leading rival sales this year
The higher your market share, the higher proportion of the market you control.
Market growth rate
 Market Growth is used as a measure of a market’s attractiveness.
Individual Sales this year – Individual sales last year
MGR =
Individual Sales last year

 Markets experiencing high growth are ones where the total market share available is expanding
& there is plenty of opportunity for everyone to make money
The BCG growth-share matrix

It is 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.
Question marks/problem children( high growth, low market share)
 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 star & evenly cash cow but can also become dog.
 Investment should be high for question marks.
Stars
(high growth, high market share
 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.
 Attempts should be made to hold the market share otherwise the star will became a cash cow.
Cash cows
( low growth, high market share)
 They are foundation of the company & 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
 High cost – Low quality
 Business is situated at a declining stage
Why BCG matrix
To asses
 Profile of product /business
 Cash demands of products
 The development cycle of product
 Resource allocation & divestment decisions
Main steps of BCG matrix
 Identifying & dividing a company into SBU
Assessing & comparing the prospects of each SBU according to two criteria
1) SBU’s relative market share
2) Growth rate of SBU’s industry

Classifying the SBU’s on the basis of BCG matrix
Developing strategic objective for each SBU
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.
Limitation
 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 low market share can be profitable too.
EXAMPLE 1
Coca-Cola
Question marks
(high growth, low market share
Stars
(high growth, high market share)
Cash cows
(low growth, high market share
Dogs
(low growth, low market share)
EXAMPLE 2
Google
Question Marks
Stars
 Invest for growth
Cash cows
( milk to fund other business)
Dogs
EXAMPLE 3
Hindustan univer ltd
“We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel
good, look good and get more out of life.”
Company’s Profile
 Owned by the British-Dutch company Unilever which controls 52% majority stake in HUL.
 Formed in 1933 as Lever Brothers India Limited.
 India's largest consumer goods company based in Mumbai, Maharashtra.
 Company was renamed in June 2007 as “Hindustan Unilever Limited”.
 Hindustan Unilever's distribution covers over 2 million retail outlets across India directly.
 Its products include foods, beverages, cleaning agents and personal care products.
 Has an employee strength of over 16,500 employees.
 Has annual turnover of around Rs.20736 crores in 2011-12.
HUL Product Mix
The entire product range of HUL can be visualized in terms of the following of the following segments:
 FOOD BRANDS
(KISSAN, ANNAPURNA, KNORR, KWALITY WALLS, BROKE BOND, TAJ MAHAL)
 HOME CARE BRANDS
(SURF EXCEL, VIM, WHEEL, RIN, BLEACH, DOMEX)
 PERSONAL CARE BRANDS
(PEPSUDENT, CLOSE UP, AXE, REXONA, SUNSILK, DOVE , LIFEBUOY, LIRIL, LUX, PEARS, FAIR & LOVELY,
LAKEME, PONDS, VASELINE, ETC.)
BCG of HUL
Conclusion
 Though BCG matrix has its limitation it is one of the most famous & simple portfolio planning
matrix, used by large companies having multi-products.

4.BCG Matrix

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BCG MATRIX

Boston Consulting Group (BCG)

Relative market share & market growth

Relative market share

Business Unit Sales this year

Leading rival sales this year

Market growth rate

 Market Growth is used as a measure of a market’s attractiveness.

Individual Sales this year – Individual sales last year

Individual Sales last year

The BCG growth-share matrix

 Most business start of as question marks

 Investment should be high for question marks.

 Stars are leader in business

 It leads to large amount of cash consumption & cash generation.

 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 are the cash traps

 Dogs do not have potential to bring

 High cost – Low quality

 Business is situated at a declining stage

Why BCG matrix

 Profile of product /business

 Cash demands of products

 The development cycle of product

 Resource allocation & divestment decisions

Main steps of BCG matrix

 Identifying & dividing a company into SBU

1) SBU’s relative market share

2) Growth rate of SBU’s industry

Developing strategic objective for each SBU

 BCG matrix is simple & easy to understand

 Problem of getting data on market share & market growth

 High market share does not mean profits all time.

 Business with low market share can be profitable too.

 Invest for growth

Hindustan univer ltd

 Formed in 1933 as Lever Brothers India Limited.

 India's largest consumer goods company based in Mumbai, Maharashtra.

 Company was renamed in June 2007 as “Hindustan Unilever Limited”.

 Has an employee strength of over 16,500 employees.

 Has annual turnover of around Rs.20736 crores in 2011-12.

HUL Product Mix

(KISSAN, ANNAPURNA, KNORR, KWALITY WALLS, BROKE BOND, TAJ MAHAL)

 HOME CARE BRANDS

(SURF EXCEL, VIM, WHEEL, RIN, BLEACH, DOMEX)

 PERSONAL CARE BRANDS

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