BCG Growth1

BCG Growth1 - Transcript

BCG Growth Share Matrix
Presented by Dirk Kamphaus and Danny Yates

Presentation Outline


History of BCG Matrix Brief explanation of portfolio analysis BCG Matrix construction Strategy recommendations Evaluation of the tool

History of the BCG Matrix


1960 s diversification of businesses Need for universal management tool First implementation in 1969 by Boston Consulting Group

Portfolio Analysis


Strategic Business Unit SBU Definition


Single independent operation of a company Has its own competitors One manager responsible for performance



Allocation of resources over all SBUs Goals


Set benchmarks Create generalized descriptions of strategic situations

Basis of the BCG Portfolio Matrix
Source Das Boston Consulting Group Portfolio Dipl Ing Holger Blumhof

Mature Phase Cash Cow

Sales Volume Introductory Phase Time

Growth Phase Star

Decline Phase Dog

BCG Matrix Construction


Internal measure Relative market share




Firm s sales of the SBU Total market s average sales Firm s Sales of the SBU Strongest Competitor s Sales



External measure Market growth


Match strategy with market stage

BCG Matrix Format


Vertical Axis Relative Market Growth


Split at 10 by a horizontal line Split at 1x by a vertical line



Horizontal Axis Relative Market Share




Creates four quadrants in which individual SBUs are positioned as bubbles


Bubble size SBU s total revenue

The BCG Matrix
Relative Market Share High Low High Product Sales Growth Rate Low

Strategy Recommendations


Investment


Further Growth Maintain Market Position Self sustaining Fund their own growth Require funds from other SBUs Cash Cows



Cash flow




Assure the future of the company Grow into Cash Cows

Strategy Recommendations


Investment


Increase market share Selectively develop into Stars Require funds from other SBUs Cash Cows



Cash Flow




Unrealized future opportunities

Strategy Recommendations


Investment


Maintain market share Maintain capacity Positive cash flow Provides funding to support Stars and



Cash Flow




No potential for profit growth

Strategy Recommendations


Investment


Divestiture strategy Reduce capacity to free up resources Goal of Positive Cash Flow Negative Cash Flow Divestment



Cash Flow




No real growth opportunities

Evaluation of BCG Matrix Cons


Oversimplifies complex decisions Only 2 factors considered creates risk Uncertainty in market and SBU definition Only considers current businesses no dynamics Does not recognize possible synergies between SBUs Can fall prey to the GIGO syndrome

Evaluation of BCG Matrix Pros






Simple and rapid Solid basis for decision making Good measurability of market share and growth Provides information about efficient resource allocation within the organization Generator for strategic options

Conclusion


As long as management understands that the BCG Growth Share Matrix generates options which require further analysis and validation this tool can greatly enhance strategic decision making