ASSIGNMENT ON:

BCG MATRIX
 NAME ROLL NO.
 Binnu Varma 26
 Sandeep Pare 46
 Rishikesh Palekar 42
 Sandeep Ranjan 47
 Piyush Chandrakar 35
 Mayank Joshi 28
 Sukkur Busicuit
Company
SB SALES No. of SALES OF TOP 3 Players MRKT
U (million competi GROWTH
rupees) tor RATE
A B C
A 0.5 8 0.7 0.7 0.5 15%

B 1.6 22 1.6 1.6 1.0 18%

C 1.8 14 1.8 1.2 1.0 7%

D 3.2 5 3.2 0.8 0.7 4%

E 0.5 10 2.5 1.8 1.7 4%

RELATIVE MARKET SHARE AND
MARKET GROWTH RATE OF SBU’S

RMS = BUSINESS UNIT SALES THIS YEAR

LEADING RIVAL UNIT SALES THIS YEAR

RMS FOR EACH SBU

A = 0.5/0.7 = 0.714
B = 1.6/1.6 = 1
C = 1.8/1.2 = 1.5
D = 3.2/0.8 = 4.75
E = 0.5/2.5 = 0.2

MARKET GROWTH RATE AND RELATIVE MARKET SHARE ARE

THE TWO FACTORS USED IN BCG MATRIX FOR
POSITIONING OF EACH SBU’S.
BCG MATRIX
 FOUR CATEGORIES

 Dogs - Dogs have low market share and a

low growth rate and thus neither generate
nor consume a large amount of cash.
However, dogs are cash traps because of
the money tied up in a business that has
little potential. Such businesses are
candidates for divestiture.
 Question marks - Question marks are growing
rapidly and thus consume large amounts of
cash, but because they have low market shares
they do not generate much cash. The result is a
large net cash consumption. A question mark
(also known as a "problem child") has the
potential to gain market share and become a
star, and eventually a cash cow when the
market growth slows. If the question mark does
not succeed in becoming the market leader,
then after perhaps years of cash consumption it
will degenerate into a dog when the market
growth declines. Question marks must be
analyzed carefully in order to determine
whether they are worth the investment
required to grow market share.
 Stars - Stars generate large amounts of
cash because of their strong relative
market share, but also consume large
amounts of cash because of their high
growth rate; therefore the cash in each
direction approximately nets out. If a
star can maintain its large market share,
it will become a cash cow when the
market growth rate declines. The
portfolio of a diversified company always
should have stars that will become the
next cash cows and ensure future cash
generation.
 Cash cows - As leaders in a mature market, cash
cows exhibit a return on assets that is greater
than the market growth rate, and thus generate
more cash than they consume. Such business
units should be "milked", extracting the profits
and investing as little cash as possible. 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. Because the
cash cow generates a relatively stable cash flow,
its value can be determined with reasonable
accuracy by calculating the present value of its
cash stream using a discounted cash flow analysis.
SBU RMS GROWTH
RATE
A 0.714 15%

B 1 18%

C 1.5 7%

D 4.75 4%

E .2 4%
 BCG MATRIX
M
A % I
II
R 20
K 18 B Question Marks/
E STARS
16 Problem child
T
14 A

G 12
R
10
O
W
C
T
H
D E

R 8
A Cash Cow Dogs
T 6 IV
E III
4 10x 4x 2x 1.5x 1x 0.5x 0.4x 0.3x 0.2x 0.1x
RELATIVE MARKET SHARE
Recommendation-on Strategies

Strategy CATEGORY SBU

Recommende
d

Divest Dog E

Invest Problem A,B

Child
Hold Star B

Harvest Cow D C
 Limitations of matrix
A Characteristic of each SBU will be
different in long term
B In BCG matrix, Individuality of product is
given less preference, consideration is
given to Strategic Business unit.
C There is an assumption that higher rates
of profit are directly related to high rates
of market share.
D Its not easy to take decision based on matrix only.
Y-axis it has taken only annual market growth rate which
doesn’t represent market attractiveness fully .
Other important considerations such as, SIZE,
PROFITABILITY, COMPETITIVE DENSITY,MARKET
RESTRICTIONS, POLITICS
 X-axis Relative Market Share is not a good indicator of
relative market strength.
Because it is determined by
1. TECHNOLOGICAL COMPETENCE
2. MANUF. STRENGTH AT LOW COST
3. FINANCIAL STRENGTH OF RIVAL
4. DISTRIBUTION STRENGTH
5. BRADING & PEOPLE STRENGTH

E BCG is a QUALITITIVE MODEL & we need a quantitative model i.e.

Facts & Figures
F It can cause wrong decisions like
divesting dogs, which may be core
business of company.
or
Investing more on dogs, even though it is
failing continuously .
To make a healthy recommendation,
we need additional data:
 Cooperation level between among all
SBUs must be specified.
 Nature of product & market should be
specified as each SBU has different
potential and requires it’s own
objective.
Thank you