Boston Consulting Growth Matrix [BCG]

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix,
Boston Consulting Group analysis) is a chart that had been created by Bruce
Henderson for the Boston Consulting Group in 1970 to help corporations with
analyzing their business units or product lines. This helps the company allocate
resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.

The Boston Matrix categorizes opportunities into four groups, shown on axes of
Market Growth and Market Share:
Dogs

These are more charitably called pets, are units with low market share in a
mature, slow-growing industry. These units typically "break even", generating
barely enough cash to maintain the business's market share. Though owning a
break-even unit provides the social benefit of providing jobs and possible
synergies that assist other business units, from an accounting point of view such a
unit is worthless, not generating cash for the company.

Cash Cows

They are units with high market share in a slow-growing industry. These units
typically generate cash in excess of the amount of cash needed to maintain the
business. They are regarded as staid and boring, in a "mature" market, and every
corporation would be thrilled to own as many as possible. They are to be "milked"
continuously with as little investment as possible, since such investment would be
wasted in an industry with low growth.

Stars

They are units with a high market share in a fast-growing industry. The hope is
that stars become the next cash cows. Sustaining the business unit's market
leadership may require extra cash, but this is worthwhile if that's what it takes for
the unit to remain a leader. They have a high point shares and are the ideal
businesses.

Question Marks (Problem Child)

Businesses with low point share but which may have a high growth rate. This
suggests that they have potential but may require huge ever, a competing force
extraordinary effort in order to grow point share.
As the BCG stated in 1970:
“Only a diversified company with a balanced portfolio can use its strengths to
truly capitalize on its growth opportunities. The balanced portfolio has:
 stars whose high share and high growth assure the future;
 cash cows that supply funds for that future growth; and
 Question marks to be converted into stars with the added funds.”

Relative Market Share:

This indicates likely cash generation, because the higher the share the more cash
will be generated. As a result of 'economies of scale' (a basic assumption of the
BCG Matrix), it is assumed that these earnings will grow faster the higher the
share. The exact measure is the brand's share relative to its largest competitor.
Thus, if the largest competitor had a share of 60 percent, the ratio would be 1:3,
implying that the organization's brand was in a relatively weak position.

Market Growth Rate:

Rapidly growing brands, in rapidly growing markets, are what organizations strive
for; but, as we have seen, the penalty is that they are usually net cash users - they
require investment. The reason for this is often because the growth is being
'bought' by the high investment, in the reasonable expectation that a high market
share will eventually turn into a sound investment in future profits. The theory
behind the matrix assumes, therefore, that a higher growth rate is indicative of
accompanying demands on investment. The cut-off point is usually chosen as 10
per cent per annum. Determining this cut-off point, the rate above which the
growth is deemed to be significant (and likely to lead to extra demands on cash) is
a critical requirement of the technique; and one that, again, makes the use of the
BCG Matrix problematical in some product areas. What is more, the evidence,
from FMCG markets at least, is that the most typical pattern is of very low growth,
less than 1 per cent per annum. This is outside the range normally considered in
BCG Matrix work, which may make application of this form of analysis unworkable
in many markets.
 ITC LIMITED

ITC Limited which previously stood for Imperial Tobacco Company of India
Limited, is one of India`s foremost private sector companies with a market
capitalisation of more than US $ 15 billion and a turover of US $ 4.75 billion. Rated
among the World's Best Big Companies by Forbes magazine, ITC ranks third in
pre-tax profit among India's private sector corporations.
The company is headed by Yogesh Chander Deveshwar. It employs over 20,000
people at more than 60 locations across India and is listed on Forbes 2000.

 ITC was incorporated on August 24, 1910 under the name of 'Imperial
Tobacco Company of India Limited'.
 ITC's Packaging & Printing Business Division was set up in 1925.
 In 1975 the Company launched its Hotels business with the acquisition of a
hotel in Chennai.
 In 1979, ITC entered the Paperboards business.
 In 1990, ITC acquired Tribeni Tissues Limited.
 In 2000, ITC's Packaging & Printing business launched a line of high quality
greeting cards under the brand name 'Expressions'.
 ITC also entered the Lifestyle Retailing business with the Wills Sport range
of international quality relaxed wear for men and women in 2000.
 In 2000, ITC spun off its information technology business into a wholly
owned subsidiary, ITC Infotech India Limited.
 From 2002 onwards, ITC have also ventured in the market of safety
matches, agarbattis and fragrances.

ITC Business Portfolio

 Cigarettes, other FMCG

 Hotels
 Agri Business- Leaf Tobacco, Agri Commodities
 Paperboard, paper and packaging
 Infotech
Rural Initiatives

ITC's Agri-Business is India's second largest exporter of agricultural products. ITC is

one of the India's biggest foreign exchange earners (US $ 2 billion in the last
decade). The Company's 'e-Choupal' initiative is enabling Indian agriculture
significantly enhance its competitiveness by empowering Indian farmers through
the power of the Internet. This transformational strategy, which has already
become the subject matter of a case study at Harvard Business School, is
expected to progressively create for ITC a huge rural distribution infrastructure,
significantly enhancing the Company's marketing reach.

Corporate philanthropy

ITC Echoupal creatively leverages information technology to set up a meta-market

in favor of India's small and poor farmers, who would otherwise continue to
operate and transact in 'un-evolved' markets.
As of July 2007, ITC Echoupal services, through 6400 Echoupal across 8 states,
reach more than 4 million farmers in about 40,000 villages. ITC intends scaling up
the initiative with 20,000 choupals and 700 saagars to reach 10 million farmers in
100,000 villages by 2010.
Free access to Internet is also opening windows of rural India to the world at
large. ITC eChoupal is now being regarded as a reliable delivery mechanism for
resource development initiatives. Its potential is being tested through pilot
projects in healthcare, educational services, water management and cattle health
management with the help of several service providers including non-
governmental organizations.
 High BCG MATRIX FOR ITC LIMITED

Stars ?
• Hotels  FMCG- foods, lifestyle
Growth Rate

• Paperboards/ Packaging Retailing, Personal care,

• Agri business Education and stationery
 ITC Infotech

Cows Dogs
• FMCG-Cigarettes  FMCG- Safety Matches,
Agarbattis
Low

High Low

Market share
1. CASH COW - ITC`s cigarette business

 Market leadership
 Powerful brands across segments
 Leadership in all segments - geographic & price
 Extensive FMCG distribution network
o Direct servicing of 1,00,000 markets & 2 million retail outlets
 World-class state-of-the-art technology and products
o Investment - Rs.10 billion in six years
 Exciting long term growth potential
 Growth Potential:
o Cigarettes account for only 15% of tobacco consumed in India unlike
world pattern of 85% due to prolonged punitive taxation
o Cigarettes (15% of tobacco consumption) contribute nearly 85% of
Revenue to the Exchequer from tobacco sector
o Of the 58% of adult Indian males who consume tobacco, barely 15%
can afford cigarettes
 Biri : Cigarettes ratio = 10 : 1
 Annual per capita adult cigarette consumption in India is appx. one tenth
world average : 141
 Future growth depends on relative rates of growth of per capita income
and moderation in taxes
2. STARS

- ITC`s Paperboard Industries

 Market leader in growth segment - value added coated boards

 World-class contemporary technology
o Elemental Chlorine Free (ECF) Pulp Mill fully operational – only one of
its kind in India meeting world-class environmental standards
 Internationally competitive quality and cost
 Social farm forestry in mill command area to improve access to cost
effective fibre & to attain self-sufficiency
o Biotech research based high yielding Clones – effectiveness tested in
nearly 68,000 hectares
 Fully integrated operations with in-house pulping capacity at appx. 1.10 lac
MT
o Expansion programme underway; source of sustainable competitive
advantage

- ITC`s Agri commodity Business

 Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products,

Coffee etc.
 Unique CRM programme in commodity exports
 Leveraging IT for the transformational ‘e-Choupal’ initiative
o Rural India’s largest Internet-based intervention
o Over 38000 villages linked through around 6400 e-Choupals
servicing over 3.5 million farmers
 Distinctive sourcing capability for ITC’s Foods business
- ITC`s Hotel Business

ITC-Welcomgroup: A leading hotel chain in India

 Strategy to establish presence in key business locations to complete the
chain achieved in end 2004
 Over 5200 rooms under 4 distinct brands

CATEGORY BRAND POSITIONING

Luxury ITC Hotel: Luxury “Mansions of Luxury”
Collection
Upper Scale Welcome Hotel: Sheraton “Passion for Quality”
Upper- mid- scale Fortune Hotels “Promise of True Value”
Heritage Welcome Heritage “Unique Experiences”

 Capacity expansion underway at Bangalore and Chennai; plans for other

locations also being progressed
 Fastest growing hotel chain with highest operating efficiency (PBDIT/Net
Income @ 45%) amongst the 3 leading chains
 Leverages unique service proposition and international alliance with
Starwood Hotels & Resorts
o ‘Luxury Collection’ / ‘Sheraton’
3. Question Mark- “?”

- Wills Lifestyle

 ITC's Lifestyle Retailing Business Division has established a nationwide

retailing presence through its Wills Lifestyle chain of exclusive specialty
stores, which offers:

 Wills Classic work wear

 Wills Sport relaxed wear
 Wills Clublife evening wear
 Wills Signature designer wear

 It believes in the philosophy of ‘Enjoying the Change' - the change that

comes through actively exploring one's own multifacetedness and
stretching one's limits.
 Wills Lifestyle provides a truly 'International Shopping Experience' through
world-class ambience, customer facilitation and clearly differentiated
product presentation.
 Plans to increase its footprints by doubling the number the stores and triple
the floor area and thus open larger stores.

- Education and stationery

 ITC's Greeting & Gifting products include Expressions range of greeting

cards and gifting products.
 The gifting portfolio includes autograph books, slam books, party
invitations, letter pads, gift-wraps, pop up books & mini books.
 The business also markets Expressions Regalia, a connoisseur's collection of
greeting cards.
 ITC has a tie-up with the NGO SOS Children's Villages of India. This range
comprises social cause cards and desk calendars.
 ITC's stationery brands Paper Kraft & Classmate are the most widely
distributed brands across India.
 ITC has invested in building a digital library of world class images at its
business headquarters at Chennai.
 The business also exports greeting cards to the U.S., Europe, UAE.

- Foods

 ITC made its entry into the branded & packaged Foods business in August
2001 with the launch of the Kitchens of India brand.
 A more broad-based entry has been made since June 2002 with brand
launches in the Confectionery, Staples and Snack Foods segments.
 The packaged foods business is an ideal avenue to leverage ITC's proven
strengths in the areas of hospitality and branded cuisine, contemporary
packaging and sourcing of agricultural commodities.
 The unwavering commitment to internationally benchmarked quality
standards enabled ITC to rapidly gain market standing in all its 6 brands:
• Kitchens of India
• Aashirvaad
• Sunfeast
• mint-o
• Candyman
• Bingo!

- ITC Infotech

 A service delivery footprint spanning over 140 countries

 ITC Infotech conforms to the highest standards in international process
quality, with ISO 27001, ISO 9001, SEI CMM Level 5 and BS 7799
accreditations. Featured amongst Top 100 Global Outsourcing Companies
in the Leaders category
 TC Infotech offers IT services and solutions across five key industry
verticals: Banking, Financial Services & Insurance (BFSI), Consumer
Packaged Goods (CPG) & Retail, Manufacturing & Engineering Services,
Travel, Hospitality & Transportation and Media & Entertainment.