PORTFOLIO MANAGEMNT:

BCG MATRIX

Made by:-
Vernica Walia 21
Yamini Negi 24
Yukti Mittal 25
Varun Malik 26
Sukhpreet Banipal 41
Vijendra Singh Rana 53
 MARKET SHARE
• Market share is the percentage of the total market that is being serviced
by the company, measured either in revenue terms or unit volume terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year

Leading rival sales this year

• The higher the market share, the higher proportion of the market is under
control.
 MARKET GROWTH
RATE
• Market growth is used as a measure of a market’s
attractiveness.

• MGR = Individual sales - individual sales

this year last year
Individual sales last year

• Markets experiencing high growth are ones where the

total market share available is expanding, and there’s
plenty of opportunity for everyone to make money.
THE BCG GROWTH-SHARE

MATRIX
• It is a portfolio planning model which is based on the
observation that a company’s business units can be classified in
to four categories:
 Stars
 Question marks
 Cash cows
 Dogs

• It is based on the combination of market growth and market

share relative to the next best competitor.
 STARS
High growth, High market share

• Stars are leaders in business.

• They also require heavy investment, to
maintain its large market share.
• It leads to large amount of cash
consumption and cash generation.
• Attempts should be made to hold the
market share otherwise the star will
become a CASH COW.
 CASH COWS
Low growth , High market share

• They are foundation of the company and

often the stars of yesterday.
• They generate more cash than required.
• They extract the profits by investing as
little cash as possible
• They are located in an industry that is
mature, not growing or declining.
 DOGS
Low growth, Low market share

• Dogs are the cash traps.

• Dogs do not have potential to bring in
much cash.
• Number of dogs in the company should
be minimized.
• Business is situated at a declining
stage.
 Problem Childs
High growth , Low market share

• Most businesses start of as Problem Childs.

• They will absorb great amounts of cash if the
market share remains unchanged, (low).
• Why Problem Childs?
• Problem Childs have potential to become star
and eventually cash cow but can also
become a dog.
• Investments should be high for Problem
Childs
 WHY BCG MATRIX ?

To assess :
 Profiles of products/businesses
 The cash demands of products
 The development cycles of products
 Resource allocation and divestment
decisions
 MAIN STEPS OF BCG
MATRIX
• Identifying and dividing a company into SBU.
• Assessing and comparing the prospects of each
SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
• Classifying the SBU’S on the basis of BCG matrix.
• Developing strategic objectives for each SBU.
BCG MATRIX WITH CASH FLOW
 BENEFITS
• BCG MATRIX 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.
 LIMITATIONS

• BCG MATRIX uses only two dimensions, Relative

market share and market growth rate.
• Problems of getting data on market share and
market growth.
• High market share does not mean profits all the
time.
• Business with low market share can be profitable
too.
 Relative Market share of A
RMS = Business unit sales this year
Leading rival sales this year
= 0.5 = 0.7142 = 0.7x
0.7

Market Growth Rate = 15%

Hence, it is a “Question Marks” for the company

Recommendations:-
1) INVEST in A as it is Question Marks and has 7
competitors
2) Can become STARS and eventually CASH COWS in
the near future
 Relative Market share of B
RMS = Business unit sales this year
Leading rival sales this year
= 1.6 = 1.0 = 1x
1.6

Market Growth Rate = 18%

Hence, it is a “Transforming from Question Marks to
Stars” for the company

Recommendations:-
1) INVEST in B as it is becoming STARS and has 21
competitors
2) Can become CASH COWS in the long run
 Relative Market share of C
RMS = Business unit sales this year
Leading rival sales this year
= 1.8 = 1.5 = 1.5x
1.2

Market Growth Rate = 7%

Hence, it is a “Cash Cow” for the company

Recommendations:-
Use the cash and revenues generated by C to pump
into A and B and make them Stars by added R&D and
promotion etc.
 Relative Market share of D
RMS = Business unit sales this year
Leading rival sales this year
= 3.2 = 4 = 4x
0.8

Market Growth Rate = 4%

Hence, it is a “Cash Cows” for the company

Recommendations:-
1) Don’t Invest too much as the industry is either saturated or
declining and has 4 competitors
2) Already a leader in sales
3) Again use the cash generated for investing in A and B.
4) Use revenues generated for R&D for developing new Products.
 Relative Market share of E
RMS = Business unit sales this year
Leading rival sales this year
= 0.5 = 0.2 = 0.2x
2.5

Market Growth Rate = 4%

Hence, it is a “DOGS” for the company

Recommendations:-
1) The company should DIVEST as there is no scope
in this business
2) Search for other products or horizons
 STARS Problem Childs

18%
B
• 16%

14%

12%
A
10%

8%

6%

Market 4%

growth 2%
CASH COWS DOGS
10x 5x 2x 1x 0.5x 0.2x 0.1x

D E

Relative Market Share

 Is the Portfolio Healthy.
• As the portfolio consists of healthy mix of SBU’s across all
quadrants.
• The cash cows can provide the capital for developing B
and A into Stars, and also for R&D.
• Thus the financing is internal
• The Domination of B and A can be increased through
further development from cash generated by Cash Cows.
• E can be divested whenever there is urgent need of funds.
 Additional Facts Required

• Current funds allocated to each SBU.

• Amount of Current Investment in R&D
• The current positioning of each SBU
• Time of launch of each SBU.
 CONCLUSION

Though BCG MATRIX has its limitations it is one

of the most FAMOUS AND SIMPLE portfolio
planning matrix ,used by large companies
having multi-products.
Thank You