BCG Model in Marketing?

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Marketing Management

Unit 2 Scanning Marketing Opportunities Chapter 4 - Strategic Planning Lesson 12 - Business Portfolios, Boston Consulting Group (BCG) Modal Hello students! After having an understanding of what an SBU is you also need to now how do the companies select a particular strategy for which they need to analyze their SBUs? There is a matrix given by the Boston Consultancy Group, which can be used by the companies for the purpose of analysis, which will be discussed in this lesson, and also how useful it is.

BCG Model
The BCG Matrix, named after the Boston Consulting Group (BCG), is perhaps the most famous 2x2 matrix. The matrix measures a company’s relative market share on the horizontal axis and its growth rate on the vertical axis. 20% MarketGrowth rate 10%

10x 4x 2x 1.5x 1x 0.5x 0.4x 0.3x 0.2x

0.1x

Relative Market Share
THE GROWTH SHARE MATRIX- the market growth rate on the vertical axis indicates the annual growth rate of the market in which the business operates. It ranges from 0 to 20 percent. A market growth rate above 10 percent is considered high. Relative market share, which is measured on the horizontal axis, refers to the SBU’s market share relative to that of its largest competitor in the segment. A relative market share of 0.1 means that the company’s sales volume is only 10 percent of the leader’s; a relative share of 10 means that the company’s SBU is the leader and has 10 times the sales of the next-strongest competitor in the market.

The growth share matrix is divided into four cells, each indicating a different type of business: 1. Question Mark(Problem Child) – Businesses that operate in high-growth markets but have low relative market shares. A question mark requires a lot of cash because the company has to spend money on plant, equipment and personnel to keep up with the fast-growing market, and because it wants to overtake the market leader. The company has to decide whether to keep pouring money into the business or not. 2. Stars – The market leaders in the high growth market. A star does not necessarily produce a positive cash flow for the company. The company must spend substantial funds to keep up with the high market growth and to fight off compatitors’ attacks. 3. Cash Cows – Stars with a falling growth rate that still have the largest relative market share and produce a lot of cash for the company. The company does not have to finance expension because the market’s growth rate has slowed. Because the business is the market leader, it enjoys economies of scale and higher profit margins. The company uses its cash cows to pay bills and support other businesses. If the cash cow starts losing relative market share, the company will

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Marketing Management

have to pump money back into it to maintain market leadership. 4. Dogs – Businesses that have weak market share in low growth markets. A dog may not require substantial cash, but it ties up capital that couls better be deployed elsewhere.The company should consider whether it is holding on to these businesses for good reasons or not.

After plotting its various businesses in the growth-share matrix, a company must determine whether its portfolio is healthy. An unbalanced portfolio would have too many dogs or quaestion marks and too few stars and cash cows.

STRATEGIC BUSINESS UNITS STRATEGIES

The Boston Matrix - Product Portfolio Decisions
Like Ansoff’s matrix, the Boston Matrix is a well-known tool for the marketing manager. It was developed by the large US consulting group and is an approach to product portfolio planning. It has two controlling aspect namely relative market share (meaning relative to your competition) and market growth. You would look at each individual product in your range (or portfolio) and place it onto the matrix. You would do this for every product in the range. You can then plot the products of your rivals to give relative...
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