How to Perform Bcg Analysis
THE BCG MATRIX
Introduction:
* Imagine that you're reviewing your organization's products. You need to decide which ones you should focus investment on. * One of the products is doing well financially. However, demand has fallen, and this trend looks set to continue. * Another product is also doing well, but it's in a new market, and needs a lot of cash to support it. Should you continue investing in it? * And another product is barely profitable, although its market is growing. Should you kill it or keep it? To make these decisions, you need to look beyond the income that the products are currently bringing in. You need to assess how they're likely to perform in future.
BCG Growth- Share Matrix was developed in 1967 by the Boston Consulting Group and is illustrated by a matrix. The market’s rate of growth is indicated on the vertical axis and the firm’s share of the market is indicated on the horizontal axis. A firm’s business units can be plotted on the matrix with a circle whose size denotes the relative size of the business unit. The horizontal position of a business indicates its market share and its vertical position depicts the growth rate of the market in which it competes. Managers and consultants can categorize each business unit as a star, question mark, cash cow or a dog, depending on each one’s relative market share and the growth rate of its market.
Market Share and Market Growth
To use the matrix most effectively, you need know how market share and market growth are related.
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. * The Boston Matrix assumes that if you enjoy a high market share,
Introduction:
* Imagine that you're reviewing your organization's products. You need to decide which ones you should focus investment on. * One of the products is doing well financially. However, demand has fallen, and this trend looks set to continue. * Another product is also doing well, but it's in a new market, and needs a lot of cash to support it. Should you continue investing in it? * And another product is barely profitable, although its market is growing. Should you kill it or keep it? To make these decisions, you need to look beyond the income that the products are currently bringing in. You need to assess how they're likely to perform in future.
BCG Growth- Share Matrix was developed in 1967 by the Boston Consulting Group and is illustrated by a matrix. The market’s rate of growth is indicated on the vertical axis and the firm’s share of the market is indicated on the horizontal axis. A firm’s business units can be plotted on the matrix with a circle whose size denotes the relative size of the business unit. The horizontal position of a business indicates its market share and its vertical position depicts the growth rate of the market in which it competes. Managers and consultants can categorize each business unit as a star, question mark, cash cow or a dog, depending on each one’s relative market share and the growth rate of its market.
Market Share and Market Growth
To use the matrix most effectively, you need know how market share and market growth are related.
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. * The Boston Matrix assumes that if you enjoy a high market share,