Presentation by Salman Rafie Fathimath Zuhra Hadil Jamal

Presentation by Salman Rafie Fathimath Zuhra Hadil Jamal Haneena Yasmin

Content Introduction Note Matrix Advantages Disadvantages Summary

Introduction Popular tool to help a business analyze its portfolio. Portfolio – the range of products sold by a business. Decide how to allocate investment. Marketing Help budget, R&D resource. in making decisions.

Note BCG Matrix created for Boston Consulting Group Created by Bruce Henderson in 1968. Used to evaluate individual business units – called Strategic Business Units. Principle – every company should have a portfolio containing both high-growth products requiring cash investment and low growth that throw off excess cash. Having both ensures long term business success.

Matrix It’s a simple grid with market growth on one axis and market share on the other. Market growth : Is the market in which the product is being sold growing quickly, slowly or not at all? Market share : Does the product have a high or a low share of the current market?

Portfolio Star - High share and High growth Cash cow - High share and Low growth Problem Dog child – Low share and High growth – Low share and Low growth

Star These are products with high market share in growth market. They have the potential to provide high proportion of the future profits of the business. It is thus advisable for a business to invest in these products to maintain market leadership. Thus securing future profits as the market continues to grow.

Cash cow These are products with a high market share in a slow growing market. They are profitable, generating good margins and throwing off excess cash without the need for significant investment. They need to be milked for profits but given minimum investment. In a nutshell, we want to milk these products without killing the cow.

Problem Child Also known as question mark. These are products with a low market share in a high growth market. Because of this their growth rate going forward is unclear and further investigation is needed to decide what to do with these products. These products might become stars, but equally, they might cash and burn as its not easy to spot a future star.

Dogs These are products with a low market share in a low growth markets. If these products are not profitable you may wish to divest them or consider a red ocean strategy. If a dog is profitable you should invest as little as possible into it, or even consider divesting it.

Advantages Simple Easy to use. to understand. Provide high level way to see the opportunities for each product in your portfolio. Enables you to think about how to allocate your limited resources to the portfolio so that the profit is maximizes over the long term. Shows Eg: if your portfolio is balanced. if you have too few products in your portfolio then you could be in the dangerous position of having all your eggs in one basket.

Disadvantages It neglects the effects of synergies between business units. High market share is not the only success factor. Market growth is not the only indicator for attractiveness of a market. Sometimes The Dogs can earn even more cash as Cash Cows. problems of getting data on the market share and market growth There is no clear definition of what constitutes a “market”. A business with a low market share can be profitable too. It neglects small competitors that have fast growing market shares.

Summary Method for examining a portfolio of products by relative market share and relative market growth. Results in the portfolio broken down into stars, cash cows, dogs and question marks. Information within matrix can be used to create the right portfolio mix or a balanced portfolio. Portfolio should have enough stars to secure the future high growth of the organization. Should have enough cash cows to supply the funding for this future growth have enough question marks in the portfolio with the potential to be turned into future stars.

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