Bcg Matrix
What is BCG matrix?
The BCG matrix is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 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. Analysis of market performance by firms using its principles has called its usefulness into question, and it has been removed from some major marketing textbooks.
Understanding the Matrix
BCG matrix means of analyzing the balance of an organization’s product portfolio. According to this matrix, two basic factors define a product’s strategic stance in the market place:
1. Relative market share – for each product, the ratio of the share of the organization’s product divided by the share of the market leader;
2. Market growth rate – for each product, the market growth rate of the product category. Relative market share is important because, in the competitive battle of the market place, it is advantageous to have a larger share than rivals: this gives room for maneuver, the scale to undertake investment and the ability to command distribution.
Stars - The upper-left quadrant contains the stars: products with high relative market shares operating in high-growth markets. The growth rate will mean that they will need heavy investment and will therefore be cash users. However, because they have high market shares, it is assumed that they will have economies of scale and be able to generate large amounts of cash. Overall, it is therefore asserted that they will be cash neutral – an assumption not necessarily supported in practice and not yet fully tested.
Cash cows - The lower-left quadrant shows the cash cows: product areas that have high relative market shares but exist in low-growth markets. The business is mature and it is assumed that lower levels of investment will be required. On this basis, it is
The BCG matrix is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 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. Analysis of market performance by firms using its principles has called its usefulness into question, and it has been removed from some major marketing textbooks.
Understanding the Matrix
BCG matrix means of analyzing the balance of an organization’s product portfolio. According to this matrix, two basic factors define a product’s strategic stance in the market place:
1. Relative market share – for each product, the ratio of the share of the organization’s product divided by the share of the market leader;
2. Market growth rate – for each product, the market growth rate of the product category. Relative market share is important because, in the competitive battle of the market place, it is advantageous to have a larger share than rivals: this gives room for maneuver, the scale to undertake investment and the ability to command distribution.
Stars - The upper-left quadrant contains the stars: products with high relative market shares operating in high-growth markets. The growth rate will mean that they will need heavy investment and will therefore be cash users. However, because they have high market shares, it is assumed that they will have economies of scale and be able to generate large amounts of cash. Overall, it is therefore asserted that they will be cash neutral – an assumption not necessarily supported in practice and not yet fully tested.
Cash cows - The lower-left quadrant shows the cash cows: product areas that have high relative market shares but exist in low-growth markets. The business is mature and it is assumed that lower levels of investment will be required. On this basis, it is