What is a BCG Matrix ?
BCG matrix (also referred to as Growth-Share Matrix) is a portfolio
planning model used to analyze the products in the business’s
portfolio according to their growth and relative market share.
The model is based on the observation that a company’s
business units can be classified into four categories:
• Cash Cows
• Stars
• Question Marks
• Dogs
It is based on the combination of market growth and market
share relative to the next best competitor.
Examples of BCG Matrix :
1. We Choose L'Oréal Paris for analysis:
Market we choose:
• The chosen market is the Cosmetics Industry which includes
primarily- Skincare, Makeup, Haircare, Hair colour and
Fragrances.
Market Share:
• Relative Market Share= Market Share/Rival’s Market Share
Market Growth Rate:
• Overall Growth rate in Cosmetics Industry (as of 2018) = 4.8%
2. Day Fresh-Dairy land ltd
Product Categories:
• Drinking Yogurts
• Chocolate milk
• Lactose free milk
• Pasteurized milk
• Cream
• Flavored milk
• Salted yogurts
• Cheese Block
• Raita
• Tea Whitener
Market we choose:
Beverages
Market Share
Sales
Pasturized Milk UHT Milk Sterilized Milk Flavored Milk Yougurt and Raita Raw milk Cheese
Cheese
0%
Pasturized Milk
Raw milk 17%
21%
Yougurt and Raita
3%
UHT Milk
22%
Sterilized Milk
Flavored Milk 1%
37%
Overall growth rate of Dairy products 38.6%
Day Fresh Market Share Leading Rival Rival’s Market Relative
Categories Share Market Share
Pasteurized 13% Milk Pak 45% 0.28%
milk
UHT milk 19% Opler's 44% 0.43%
Flavored milk 43% Pakola 65% 0.66%
Yogurt and 8% Nestle 22% 0.36%
Raita
BCG Matrix
STAR ?
Growth Rate
49%
35%
COW 8%
DOG
Market Share
Strategies for all categories:
• Stars: Vertical integration, horizontal integration, market penetration,
market development, product development
• Question Marks: Market penetration, market development, product
development, divestiture.
• Cash Cows: Product development, diversification
• Dogs: Retrenchment, divestiture, liquidation
Advantages of BCG Matrix:
• It is simple and easy to understand.
• 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 company’s future growth and profitability.
• The BCG Matrix produces a framework for allocating resources
among different products and makes it possible to compare the
product portfolio at a glance.
Limitations of BCG Matrix:
• BCG Matrix uses only two dimensions, relative market share and market
growth rate. These are not the only indicators of profitability, attractiveness
or success.
• It neglects the effects of synergy between brands.
• Business with low market share can be profitable too.
• High market share does not always lead to high profits since there is also a
high cost that goes into getting a high market share.
• At times, dogs may help the business or other products in gaining
competitive advantage.
• The model neglects small competitors that have fast-growing market shares.
