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Understanding the BCG Matrix Explained

The document summarizes the BCG matrix, a portfolio planning model developed in the 1970s. The BCG matrix uses two dimensions - market share and market growth rate - to categorize products as Stars, Cash Cows, Dogs, or Question Marks. Each category is defined by its relative market share and growth. The summary also lists benefits like simplicity and providing a framework for strategic decisions, as well as limitations like neglecting synergies between business units.

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Arohi Chaturvedi
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87 views10 pages

Understanding the BCG Matrix Explained

The document summarizes the BCG matrix, a portfolio planning model developed in the 1970s. The BCG matrix uses two dimensions - market share and market growth rate - to categorize products as Stars, Cash Cows, Dogs, or Question Marks. Each category is defined by its relative market share and growth. The summary also lists benefits like simplicity and providing a framework for strategic decisions, as well as limitations like neglecting synergies between business units.

Uploaded by

Arohi Chaturvedi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd

Submitted By: Akanksha Agrawal Aakanksha Vijayvargia

BCG Matrix is a portfolio planning model which was developed by Bruce Henderson of the Boston Consulting Group in the early 1970s. It is based on Product Life Cycle theory. The Boston Consulting Group has 2 dimensions : Market Share and Market Growth.

STARS (High growth and high market share)


Stars are leaders in the business but still

need a lot of support for promotion and placement. If market share is kept, Stars are likely to grow into Cash Cows. In this dimension, Hold or Increase Strategy is followed. Eg: Lux, Surf Excel, Fair & Lovely, Ponds, Sunsilk, Pepsodent, Brooke Bond Tea & Lakme beauty products.

CASH COW (Low growth, High Market Share )


Cash Cows are often the Stars of

yesterday and they are the foundation of the company. Because of the low growth and profits, cash generation should be high and they enjoy Economies of Scale. In this dimension, Hold Strategy is used. Eg: Lifebuoy

DOGS (Low Growth and Low Market share)


Dogs should be avoided and minimized.

Expensive turn-around plans usually do

not help. Divestment strategy is followed. Eg: Ponds Toothpaste, Fair & Lovely Talc

QUESTION MARK (High Growth and Low Market Share)


Question marks are essentially new

products which are yet to be discovered by the buyers. Question marks have high demand and low returns due to low market share. Increase or Divestment strategy is followed. Eg: Fair & Lovely Soap, Ponds Age Miracle, Clinic Plus Multi Sachet, Lux Strawberry & Cream.

BENEFITS of the BCG MATRIX


This model is simple and easy to

understand. It provides a base for management to decide and prepare for future action. BCG method is applicable to Large companies that seek volume and experience effect. BCG Model is helpful for the managers to evaluate balance in the firms current portfolio of Stars, Cash Cows, Dogs and Question Marks.

LIMITATIONS
It neglects the effects of SYNERGY

between business units. The model uses only two dimensional market share and growth rate. The model neglects small competitors that have fast growing market share. There is no clear definition of what constitutes a market.

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