A

PRESENTATION ON

“BCG GROWTH SHARE MATRIX”

BY:
VISHWAMBAR PURANIK
INTRODUCTION

 BOSTON CONSULTING GROUP

(BCG) MATRIX is developed by BRUCE
HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY
1970’s.

 According to this technique, businesses or

products are classified as low or high
performers depending upon their market
growth rate and relative market share.
 Relative Market Share
and Market Growth
To understand the Boston Matrix you need
to understand how market share and
market growth interrelate.
  
MARKET SHARE
• Market share is the percentage of the total market
that is being serviced by your 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 your market share, the higher proportion

of the market you 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.
QUESTION MARKS
High growth , Low market share

 Most businesses start of as question marks.

 They will absorb great amounts of cash if the
market share remains unchanged, (low).
 Why question marks?
 Question marks have potential to become
star and eventually cash cow but can also
become a dog.
 Investments should be high for question
marks.
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.
 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.
PRACTICAL USE

ITC Ltd.
Vision & Mission statements
Vision: Sustain ITC’s position as one of
India’s most valuable corporations through
world class performance, creating growing
value for the Indian economy and the
Company’s stakeholders.

Mission: To enhance the wealth generating

capability of the enterprise in a globalizing
environment, delivering superior and
sustainable stakeholder value.
Business Mix of ITC Ltd.
FMCG
• Cigarettes
• Foods
• Lifestyle Retailing
• Greeting, Gifting & Stationery
• Safety Matches
• Agarbattis

Paperboards & Packaging

• Paperboards & Specialty Papers
• Packaging

Hotels

Agri - Business
• Agri-Exports
• e-Choupal
• Leaf Tobacco

Group Companies
• ITC Infotech; etc.
Business wise Sales data

Business/ Year Growth Value (Rs in Crore)

% 2005 2004

FMCG-Cigarettes 8.4 10002.54 9230.27

FMCG-Others 85.2 563.39 304.16
Hotels 124.1 577.25 257.53

Agribusiness 4.2 1780.07 1708.77

Paper & pkg. 24.9 1565.31 1253.29
Net revenue 12.99 13349.58 11815.04
 Market share of ITC Ltd.
Outstanding market leader
 Cigarettes, Hotels, Paperboards, Packaging
and Agri-Exports.

Gaining market share

 Nascent businesses of Packaged Foods &
Confectionery, Branded Apparel and Greeting
Cards.
Segment Dominance Contribution %
Revenue PBIT

Cigarettes 70% share 77.0% 87.7%

Paper & Packaging board – No. 7.3% 10.7%

Packg. 1 in Asia

Agri 1of the largest xporters 7.0% 3.7%

business from India

Hotels ITC Group ranks No.2 4.3% 5.4%

FMCG 20% share of greeting 4.4% -7.5%

(Others) cards market,
'Aashirvaad' atta is
No.1 in branded
segment
The BCG Matrix for ITC Ltd.
Stars ?
•Hotels •FMCG- Others
•Paperboards/
Packaging.
•Agro business.

Cows Dogs
•FMCG-Cigarettes •Maybe ITC
Infotech.
BCG Matrix of Bajaj Electricals
According to us, out of all the 5 SBU’s of Bajaj
Electricals –

Luminaries, Engineering & Projects and

Lighting are the Stars of the Company as they
have high Market Share and Market Growth.

Appliances are Question Marks as the company it

has high growth rate but low market share, due to
which it is planning to tie-up with other
international brands.

Fans are also Question Marks, as it has low

market share its position is 6th in the market.
Present Scenario…
Bajaj Electricals has reported a 31% growth in net
sales to Rs 304.89 crore.

The Net Profit recorded a growth of 117% at Rs.20.96

crore.

BEL has 5 Strategic Business Units namely –

a) Lighting
b) Lumanries
c) Appliances
d) Fans &
e) Engineering & Projects.
 BCG MATRIX
h

Stars Question Marks

Luminaries, Lighting Fans & Appliances
& Engineering &
Projects

Cash Cows Dogs

 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.