BCG (Growth-share) matrix

Prabodh Tuladhar
MBA-IT
Outline

• What is BCG?

• Use of BCG matrix

• Visualize cash flow

What is BCG?
• A popular strategy framework to decide what the company should
keep, sell or invest more in.

• Firm is a portfolio of businesses; businesses are largely independent

so have separate strategic directions
 Growth cutoff
needs 3 parameters to classify a business unit

• Market growth rate – represents market

attractiveness (horizontal axis)

• Relative market share – represents internal

strength of the business (vertical axis)

• Contribution to the firm – represents total sales

(area of the circle)

Market Share cutoff

 Use of BCG matrix

• Graphic view gives compact picture of the strengths of the businesses

• Identify the capacity of each business to generate cash

• Identify the cash requirements of each business

• Visualize the transfer of cash among businesses

Visualize cash flow
Identifies 4 major
thrusts
1. Increase market
Modest + or – cashflow Large Negative Cashflow share
can be expressed in terms of cash use
To visualize cash flow, BCG matrix

2. To hold market
share

3. To harvest
market share
Large Negative Cashflow Modest + or – cashflow
and generation

4. To divest market
share
 Legend

Undesired movement

Desired movement
Criticism of BCG matrix

• The experience curve and market share are not always the primary drivers of advantage

• Cash flow management is not always the primary function of a corporation. For
example, low growth corporations might return cash to shareholders rather than invest
them in question marks. High growth corporations might raise new capital rather than
risk the competitive position of their cash cows by squeezing them too hard.

• The matrix makes no distinction between markets on the basis of the profit potential of
the industry

• The matrix implies that corporate plays no role in business strategy other than to
provide the cash
 References
• Arnoldo C. Hax, N. S. (1983). The Use of the Growth-Share Matrix in Strategic Planning.

Interfaces, 13(1):46-60.

• Hayes, A. (2020, January 16). BCG Growth-Share Matrix. Retrieved from

www.investopedia.com: https://www.investopedia.com/terms/b/bcg.asp

• Morrison, A. &. (1991). Boxing up or Boxed in?: A Short History of the Boston Consulting

Group Share/ Growth Matrix. Journal of Marketting Management, 105-129.

• Whitehead, J. (2015). BCG (Growth share matrix). Wiley Encylopedia of Management, 1-2.
Thank you