BCG Matrix of Hindustan Unilever regarding its Products with proper reasons for the same
BCG Matrix of Hindustan Unilever
BCG analysis is mainly used for Multi Category / Multi Product companies. All categories and products together are said to be Business portfolio. Thus, the various entities of your business portfolio may move forward by a different pace and with a different strategy. The BCG analysis actually helps you in deciding which entities in your business portfolio are actually profitable, which duds are, which you should concentrate on and which gives you a competitive advantage over others.
Once you know which businesses stand where in your business portfolio, you also come to know which businesses need investments, which needs harvesting (making money), which needs divesting (reducing investment) and which needs to be completely taken out of the business portfolio. For a major organization like HUL, ITC etc which have multiple categories and within the categories, they have multiple lines of products; the BCG analysis becomes very important. At a holistic level, they get to make a decision on which product to continue and which product to be divested. Which product can give new returns with good investment, and which products are reaching the apex of market share.
BCG Growth Share Matrix – The BCG growth share matrix was developed by Henderson of the BCG group in 1970′s. The matrix classifies businesses / SBU’s by
1) Relative Market Share – The market share of the business / SBU / Product in the market as compared to its competitors and overall product / category.
2) Market growth rate – The growth rate of the industry as a whole is taken into consideration from which the growth rate of the product is extrapolated. This growth rate is then pitched on the graph.
Thus by having 2 basic but at the same time very important factors on X axis and Y axis, the BCG matrix makes sure that the classifications are concrete. Calculating the Market growth rate comprises of both industry growth and product growth rate thereby giving a fair knowledge of where the product / SBU stands in comparison to the Industry. The market share on the other hand comprises of the competition and the product potential in the market. Thus when we consider growth rate and market share together, it automatically gives us an overview of the competition and the industry standards as well as an idea of what the future might bring for the product.
Once the businesses have been classified, they are placed into four different quadrants of the matrix. The quadrants of the matrix are divided into
1) Cash Cows – High market share but low growth rate (most profitable).
2) Stars – High market share and High growth rate (high competition)
3) Question marks – Low market share and high growth rate (uncertainty)
4) Dogs – Low market share and low growth rate (less profitable or may even be negative profitability)
On the basis of this classification, strategies are decided for each SBU / Product. Let’s discuss the characteristics and strategies of each quadrant in detail.
1) Cash Cows – The cornerstone of any multi product business, cash cows are products which are having a high market share in a low growing market. As the market is not growing, that cash cow gains the maximum advantage by generating maximum revenue due to its high market share. Thus for any company, the cash cows are the ones which require least investment but at the same time give higher returns. These higher returns enhance the overall profitability of the firm because this excess revenue can be used in other businesses which are Stars, Dogs or Question marks. In the case of HUL following are the Cash cows like Mass Soaps, Beverages, Oral care and Laundry which are running very well in the market today, Oral and Mass soap today is doing very good hence it is the cash cows for HUL today. Strategies for cash cow – The cash cows...
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