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developed by Bruce Henderson of the Boston consulting group in the early 1970s
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.
According to this matrix, business could be
classified as high or low according to their industry growth rate and relative market share.
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
a markets attractiveness.
Markets experiencing high growth are ones where the total market share available is expanding, and theres plenty of opportunity for everyone to make money.
Question marks
Cash cows Dogs It is based on the combination of market growth and market share relative to the next best competitor.
BCG Matrix
Star
20% 18%
Question Mark
4 1
High
3
5 2
Cash Cow
Dog
7
(Cash Traps)
Low
6% 4% 2%
6
0
| | 10 | | | | | | 4 2 1. 5 1
8
| | | | | | | | 0.5 0.4 0.3 0.2 0.1
STARS
CASH COWS
share
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
should be minimized.
Business is situated at a declining
stage.
QUESTION MARKS
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.
products .
Classifying the SBUS on the basis of BCG matrix. Developing strategic objectives for each SBU.
It helps you to quickly and simply screen the opportunities open to you, and helps 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 a companys future growth and profitability.
Relative market share and market growth rate. Problems of getting data on market share and market growth.
High market share does not
India's 68th Most Trusted Brand in 2011 (from 16000 brands analyzed) and 66th Most Trusted Brand in 2012.
SBU OF M&M
Tractors
Two Wheelers Utility Vehicles
PLACE OF TRACTOR
Market share of M&M = 29% (Market Leader) 2 nd largest player is Tafe group (messy tractor)
2x
4x
1x
0%
x 0.2 x 0.1 x
LOW
Business growth Rate
HIGH 16%
10%
12%
14%
18%
20%
10x
4x
2x
1x
0%
Relative Market share
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
10x
4x
2x
1x
0%
Relative Market share
2%
4%
6%
8%
CONCLUSION
SBU
M&M mkt Share (a) Largest Competitor Mkt. share (b) 23% 52% X = a/b
TRACTORS
29% 1%
(TAFE)
1.26 0.02
TWO WHEELERS
(HERO HONDA)
UTILITY VEHICLES
42%
(TATA MOTORS)
21%
2.00
LO W
Business growth Rate
10%
12%
18%
20%
10x
4x
2x
1x
0%
Relative Market share
2%
4%
6%
8%
APPROPRIATE STRATEGIES
TRACTORS (STAR) HOLD STRATEGY (Invest to protect)
Build capacity expansion Increase investment Increase advertisement and
CONT
TWO WHEELERS (QUESTION MARK ?)
CONT
BHARTI AIRTEL
Bharti Airtel is the market leader in the telecom sector
with a market share of 31%. The market challenger in this industry is Vodafone. So we plot the BCG matrix of Airtel with respect to Vodafone. Taking the market share of Vodafone (i.e. 23%) , the relative market share of Airtel comes as 1.35X. The BCG matrix of Airtel wrt to Vodafone will look as under:
12% 10% 8% 6%
LOW
4% 2% 10x
2x
4x
1x
0%
x 0.2 x 0.1 x
VODAFONE
Vodafone is the market challenger in the
telecom sector with a market share of 23%. The market leader in this industry is Vodafone and so we plot the BCG matrix of Vodafone with respect to Airtel. Taking the market share of Airtel (i.e. 31%) , the relative market share of Vodafone comes as 0.74X. The BCG matrix of Vodafone wrt Airtel will look as under:
12% 10% 8% 6%
LOW
4% 2% 10x
2x
4x
1x
0%
x 0.2 x 0.1 x
quadrant of QUESTION MARK with respect to the market LEADER. The circle size represents the absolute market share (i.e. 23%) of Vodafone in the telecom sector.
1970s. GE is a model to perform business portfolio analysis on the SBUs. GE is rated in terms of Market Attractiveness & Business Strength It is an Enlarged & Sophisticated version of BCG.
MARKET ATTRACTIVENESS
Annual market growth rate Overall market size Historical profit margin Current size of market Market structure Market rivalry Demand variability Global opportunities
BUSINESS STRENGTH
Current market share Brand image Production capacity Corporate image Profit margins relative to competitors R & D performance Promotional effectiveness
investment. Firms may go for product differentiation or Cost leadership. Huge cash is generated in this phase. Market leaders exist in this phase.
Hold Business units that fall under hold phase attract moderate
investment. Market segmentation, Market penetration, imitation strategies are adopted in this phase. Followers exist in this phase.
Harvest - Business units that fall under this phase are
unattractive. Low priority is given in these business units. Strategies like divestment, Diversification, mergers are adopted in this phase.
ADVANTAGES
Decision of invest on different SBUs. Knowledge for innovation Decide which product to be discontinued . Better than Boston Consulting Group Matrix.
WHY BETTER ?
Broad Field of Study that point the reason for
Customer Obsession,