Bcg model

If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted.

BIC razor blades are a modern day example. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders.

Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become a cash cow or staror otherwise companies are advised to disinvest and try to get whatever possible cash out of the question marks that were not selected.

In other words, it is a comparative analysis of business potential and the evaluation of environment. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. Critical evaluation[ edit ] While theoretically useful, and widely used, several academic studies have called into question whether using the growth—share matrix actually helps businesses succeed, and the model has since been removed from some major marketing textbooks.

The next most widely reported technique is that developed by McKinsey and General Electric, which is a three-cell by three-cell matrix—using the dimensions of 'industry attractiveness' and 'business strengths'.

Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption. Growth rate and relative market share are not the only indicators of profitability. Limitations The growth-share matrix once was used widely, but has since faded from popularity as more comprehensive models have been developed.

When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued. Keep profits high - Foundation of a company 3. As a particular industry matures and its growth slows, all business units become either cash cows or dogs.

Cash cows require little investment and generate cash that can be utilized for investment in other business units. The hope is that stars become next cash cows.

This model ignores and overlooks other indicators of profitability. They require attention to determine if the venture can be viable. Each of these cells represents a particular type of business.

The selection of the relative market share metric was based upon its relationship to the experience curve. The market leader would have greater experience curve benefits, which delivers a cost leadership advantage. This approaches some of the same issues as the growth—share matrix but from a different direction and in a more complex way which may be why it is used less, or is at least less widely taught.

Question marks also known as problem children or Wild cats are businesses operating with a low market share in a high-growth market.

In such a scenario: In many markets 'dogs' can be considered loss-leaders that while not themselves profitable will lead to increased sales in other profitable areas. They neither generate cash nor require huge amount of cash. The best evidence is that the most stable position at least in fast-moving consumer goods markets is for the brand leader to have a share double that of the second brand, and triple that of the third.

It was reasoned that one of the main indicators of cash generation was relative market share, and one which pointed to cash usage was that of market growth rate. The theory behind the matrix assumes, therefore, that a higher growth rate is indicative of accompanying demands on investment. The model also applies mathematical formulas to business enterprises or products to calculate potential growth and earnings.

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool.

The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 's. It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor.

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool.

It is the most renowned corporate portfolio analysis tool. The BCG Strategic Portfolio Model is a method of approaching and analyzing business marketing and growth developed by the Boston Consulting Group. The BCG Strategic Portfolio Model is a method of approaching and analyzing business marketing and growth developed by the Boston Consulting Group.

The primary guiding principle of the BCG group's strategy is that experience in a market share leads to reduced costs and higher profits. Understanding cash flow is key to making the most of the BCG matrix. InBCG founder Bruce Henderson noted that four rules are responsible for product cash flow: .

Bcg model