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The BCG Growth Share Matrix

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by

Noel Granger

on 3 October 2012

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Transcript of The BCG Growth Share Matrix

By: Noel Granger The BCG Growth-Share Matrix Early 1970's! The Boston Consulting Group Had a Brilliant Idea! Let's create a Portfolio Planning Model that organizes the company's Strategic Business Unites (SBU) into 4 simple categories. Our comparison will be based off of
Market growth (Cash Usage)
Market Share (Cash Generation) How it is organized: High Low High Low Relative Market Share
(Cash Generation) Market Growth Rate
(Cash Usage) Question Marks and Dogs For this reason a company may choose to no longer invest in this SBU.
Low Market Share and Low Growth Rate Dogs These SBU does not create or use large amounts of cash. But they are CASH TRAPS! High Market Growth Rate
Low Market Share Question Marks

They must analyze these SBUs:
Is the unit worth the investment to increase market share? These SBU's are growing rapidly but do not generate a lot of cash Stars and Cash Cows Stars High Growth and High Market Share This means they generate a lot of cash but at the same time use up a lot of cash because of their high growth rate. A company should strive to have these SBU's in their organization. Low Market Growth Rate
High Market Share Cash Cows This means Cash Cows generate a lot of cash because...
ROA > Market Growth Rate Cash Cows should be "Milked" and the extra money should be used to invest in other areas. The BCG Growth-Share Matrix in real life... of using the BCG Growth Matrix Benefits and Limitations Effective for Resource Allocations.

Helps a company find a balance between its vision,
programs and procedures.

Useful for an Internal Analysis

Helps discover what SBU a company should invest
and and what ones they should discontinue. Has a very narrow focus.

Assumes each SBU is independent and does not consider synergy.

Market Share is not the only growth determinant.

No clear universal definition of "market" Limitations... Benefits... A different way to
use this model... High Low High Low Relative Market Share
(Cash Generation) Market Growth Rate
(Cash Usage) It adds a new element, SBU size. #$$# BCG Positions throughout the Product Life Cycle: Your Turn... Can you correctly place these products under the right category? Bibliography BCG Postions and Strategy. (n.d.). Retrieved September 20, 2012, from mrdashboard: www.mrdashboard.com/BDC_Matrix.html

Nager, F. J. (2008, July 6). Cows and Dogs in a Bear Market: Applying the BCG Matrix to Marketing. Retrieved September 23, 2012, from Atomic Tango: http://atomictango.com/2008/07/06/bcgmatrix/

Srivastava, R., & Prakash, A. (2011). Growth-Share Matrix as a Tool for Portfolio Planning: Evidence from the Indian

Telecommunication Services Industry. IUP Journal of Business Stategy, 22-23.

The BCG Growth-Share Matrix. (n.d.). Retrieved September 6, 2012, from NetMBA: www.netmba.com/strategy/matrix.bcg/
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