4.BCG Matrix
4.BCG Matrix
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.
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.
RMS :-
The higher your market share, the higher proportion of the market you control.
MGR =
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)
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.
Stars
(high growth, high market share
They also require heavy investment to maintain it’s large market share.
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.
Dogs
(low growth, low market share)
To asses
Assessing & comparing the prospects of each SBU according to two criteria
Benefits
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.
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
Question Marks
Stars
Cash cows
( milk to fund other business)
Dogs
EXAMPLE 3
“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.
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly.
Its products include foods, beverages, cleaning agents and personal care products.
The entire product range of HUL can be visualized in terms of the following of the following segments:
FOOD 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.