A

Report
Of

BCG Matrix and GE Nine Cell Matrix

Engineering College, Bikaner

(An Autonomous Institute Of Govt. Of Rajasthan)

Submitted by: Submitted to:

Ms. Rachana Poddar DR. Gaurav Bissa

M.B.A. Part-II
 BCG MATRIX AND GE NINE CELL MATRIX

Boston Consulting Group’s growth –share matrix

The BCG matrix model is a portfolio planning model developed by Bruce Henderson of
the Boston Consulting Group in the early 1970's. It was devised as a clear and simple
method for helping corporations decide which parts of their business they should allocate
their available cash to. Following the credit crunch, this is newly important in some
sectors because of the limited availability of credit. BCG Growth- share matrix deals with
the process of evaluation of the industry growth and the relative position of the firm in
the industry. The matrix classifies the businesses of a firm into four distinct categories on
the basis of the above evaluation:

Stars
Question Marks
Cash Cows
Dogs

The two parameters used for the classification are:

Industry growth
Company ‘s market share, relative to other main players

Market Share and Market Growth

To understand the Boston Matrix we need to understand how market share and market
growth interrelate.

Market share is the percentage of the total market that is being serviced by our company,
measured either in revenue terms or unit volume terms. The higher our market share, the
higher the proportion of the market we control.

The Boston Matrix assumes that if we enjoy a high market share we will be making
money. (This assumption is based on the idea that we will have been in the market long
enough to have learned how to be profitable, and will be enjoying scale economies that
give us an advantage).

The question it asks is, "Should you be investing additional resources into a particular
product line just because it is making you money?" The answer is, "not necessarily."

This is where market growth comes into play. Market growth is used as a measure of a
market's attractiveness. Markets experiencing high growth are ones where the total
market is expanding, meaning that it’s relatively easy for businesses to grow their profits,
even if their market share remains stable.

By contrast, competition in low growth markets is often bitter, and while we might have
high market share now, it may be hard to retain that market share without aggressive
discounting. This makes low growth markets less attractive.

The Boston Matrix categorizes opportunities into four groups, shown on axes of Market
Growth and Market Share:
These groups are explained below:
Stars: stars are net users of resources. A star needs a good ideal of investments supports
as it operates in a high growth market. It normally does not bring in immediate profits but
holds out great potential for the future.

Question marks: question marks, too, are net users of resources. But unlike the stars,
their future is uncertain. In addition, they are in the high-risk category while stars are in
the medium-risk category.

Cash cows: cash cows are net generators of resources. A cash cows brings a lot of cash
to the company. It does not need heavy investments; bring in a low growth market,
expansion possibility and hence investments needs of a cash cow would be minimal. It
also brings in higher profits.

Dogs: Dogs being business with weak market shares in low growth markets are generally
a drag on the company and its resources. They are actually cash traps for the company.

The BCG of Tata motor is as follows

1. Stars - The top products of tata motors: Indica
2. question mark - tata safari dicor
3. cash cows - indigo
4. dogs - Nano

NESTLE BCG Matrix

Stars

The stars are the high relative market share and high market growth. Nestle
beverages i.e. are somewhat the stars in their business, because with the high quality and
new designs which comes every now and then makes them more popular among the
customers, because customer with upper class wants the quality and nestle offers the best
quality food items.

Cash Cows
The cash cows are their baby food items i.e. nestle cerelace and other baby food
products. Company has to take measures to make these products as stars.

Dogs
The pharmaceutical products are nestle Dog, because it has low-share business
with low growth market especially when we talk about Pakistani market. The company
has to think on what it can do by improving the low share and growth market.

Question Marks

The question marks are the breakfast cereals. They have high market growth but
low market share. The company has to decide about which question mark they should try
to build into the stars and which one of these should be phased out.
GE Nine Cell Matrix or General Electric’s multifactor portfolio
planning matrix :

THE multifactor portfolio planning matrix propagated by general electric holds that a
company can appropriately rate its different businesses for the purpose of strategic
planning, on the basic of two main parameters:

1. Industry attractiveness 2. 2.
2. Company’s business strength.

The models also identifies the factors underlying each of the two parameters used for
rating the businesses. Industry attractiveness is the product of several factors such as
industry potential, the current size of the industry, the rate of the growth of the industry,
the industry structures and the profitability of the industry, likewise, company’s business
strength is the product of several factors such as company’s current market share, growth
rate, differentiation strength, brand image, corporate image, etc. each firm will have to
identify the factors specific to its industry and its competitive position. It has to also
assign due weightages to each of the factors and find out the weighted measures in
respect of the two parameters, viz. market attractiveness and firm’s business strength.

The matrix is divided into nine cells. The high, low and medium positions assigned to the
two parameters give rise to these nine cells. The matrix has three zones, one at the upper
left, one at the lower right and one central diagonal. The upper left zone represents
businesses strong in overall attractiveness; the lower right zone represents businesses that
are weak in overall attractiveness and the central diagonal zone represents businesses that
are medium in overall attractiveness. Using the ratings in the matrix, the firm can
appropriately set its objectives and strategies in respect of each of its businesses. Once
the different businesses are rightly located in the matrix, the strategic planning exercise
acquires the required clarity. It can decide the businesses it should invest/develop, the
businesses in which it should pursue selectivity/earnings and the ones it should
harvest/divest.

It utilizes industry attractiveness as a more inclusive measure than BCG's market growth
and substitutes competitive position for the original's market share.

So in some Strategic Business Units (SBU's). A large corporation may have many SBU's,
which essentially operate under the same strategic umbrella, but are distinctive and
individual. A loose example would refer to Microsoft, with SBU's for operating systems,
business software, consumer software and mobile and Internet technologies.