BCG Matrix Boston Consulting Group 1 BCG Growth

BCG Matrix Boston Consulting Group 1

BCG Growth Share Matrix Devised as a portfolio planning tool, or corporate planning tool, the BCG growth-share matrix was first conceived by Bruce Henderson of the Boston Consulting Group back in the 1970's. The concept is based on four quadrants in which a company's business units (or products/brands) are classified. The quadrants are split into combinations of "market growth" and "market share", hence also being known as the growth-share matrix or growth-market-share matrix. The matrix is scored from low to high on both the x-axis and y-axis. The x-axis generally denotes the market growth rate, or cash usage - with the y-axis denoting relative market share, or cash generation. 2

BCG Matrix Quadrants High The BCG matrix is a framework to strategically measure the potential growth rate of a company within its industry versus its relative market share. Cash Usage By plotting these factors it is possible to identify which products (or brands/units) a company should invest further in, and which products it diversify away from. Low The matrix is split into categories known as: stars, question marks, cash cows and dogs. A BCG matrix will help develop a long-term strategic marketing plan to create more profitable products. Low High Cash Generation 3

BCG Matrix Cash Cow Cash cow products deserve your attention. Cash cow brands (or products) are often well established, in constant demand, easy to produce and are therefore extremely profitable. As cash cow products do not require a lot of investment to maintain a high market share, every company should establish a cash cow to produce a reliable source of income. These cow products should be milked to produce cash. This can then be invested in "star" products to help establish them as the market leader and to generate higher ROI. BCG Matrix Rating Cash Usage – Low Cash Generation - High 4

BCG Matrix Star products are market leaders which generate the highest ROI than any other products. However, they do need continual investment to maintain market leader status. Stars are big cash generators and cash users. They shine in high growth markets. It is for this reason that companies should invest heavily in star products or brands. Successfully promoted star products will become cash cows. In the event that a star product is highly innovative, it may suffer from marketplace fluctuations ending up as a dog. BCG Matrix Rating Cash Usage – High Cash Generation - High 5

BCG Matrix Questions Question products are the hardest ones to determine if they will be successful or not. They often have a low market share and consume lots of cash and investment resources. With high levels of investment behind them, they have the opportunity to become Stars. Conversely, if they fail to gain traction in a fast high growth market, they will become dogs. Question mark products (brands/business units) can quickly become big loss makers and are often referred to as the "problem child". They need to be watched carefully. BCG Matrix Rating Cash Usage – High Cash Generation - Low 6

BCG Matrix Dogs Dog products or brands have low growth and low market share. These are not worth further investment as they will put a drain on resources for little improvement in market share. Whilst "Dogs" do not consume a lot of cash to produce or market, they also generate low returns. Meaning they can unnecessarily tie up time and cash with no long-term value. Unless these products complement or boost the performance of other products within a company's portfolio, then it is recommended to diversify away from "dog" products. BCG Matrix Rating Cash Usage – Low Cash Generation - Low 7

BCG Matrix FAQs What is the Boston matrix model? The BCG matrix is used to evaluate a company's product portfolio, and can also assess strategic business units (SBUs) such as divisions or individual companies within larger organisations. The BCG matrix is used in marketing strategies to identify where to invest marketing budgets. It will help identify which products to promote to gain more market share. Both market share and growth rate are plotted against quadrants categorised as Stars, Questions, Cash Cows and Dogs. The matrix will highlight what products are considered dogs - therefore you should remove all marketing budget. What is the purpose of BCG matrix? The Boston Matrix is a model which helps companies analyse their portfolio of products, brands or SBUs. The Boston Matrix is a planning tool used in marketing and business strategy. It helps decide which products to invest cash into and which to divert. How do you use the BCG matrix? What is the BCG matrix in marketing? 05 To use the BCG matrix, a company will review its portfolio of products or SBUs, then allocate them to one of four quadrants based on their market share, growth rate, cash generation and cash usage. This is then used to determine which products receive investment, and which are diversified from. 8

BCG Matrix In Marketing The BCG matrix can be used to visualise which marketing channels or platforms can help grow a company and the expected ROI per channel. There will be noticeable differences between B 2 B and B 2 C businesses and across industry sectors. The matrix below summarises our views on growth versus ROI. SEO Video Banner Ads High PR Growth by channel Facebook Outdoor Ads Linked. In Google Ads Twitter Instagram Low Email Marketing TV Radio Low High Expected ROI from channel 9

BCG Matrix For Apple High Low Market Growth Rate (Cash Usage) Based on various statistics and reports available on the Internet, the following example BCG matrix for Apple products looks like this: Low High Market Share (Cash Generation) 10

BCG Matrix For Coca Cola High Low Market Growth Rate (Cash Usage) Based on various statistics and reports available on the Internet, the following example BCG matrix for Coca Cola looks like this: Low High Market Share (Cash Generation) 11

BCG Matrix For Samsung High Low Market Growth Rate (Cash Usage) Based on various statistics and reports available on the Internet, the following example BCG matrix for Samsung products looks like this: Low High Market Share (Cash Generation) 12

BCG Matrix For Nestle High Low Market Growth Rate (Cash Usage) Based on various statistics and reports available on the Internet, the following example BCG matrix for Nestle produce looks like this: Low High Market Share (Cash Generation) 13

CHECKLIST BCG Matrix Checklist Download a copy of BCG Matrix Identify your products or brands Analyse historical sales & growth data Compare your products to your competitors market share Assign your products to a quadrant and allocate investment accordingly