2. BCG Growth Share Matrix
The Growth share matrix was developed by BCG in 1970. The Boston Consulting Group (BGC) growth
share matrix is a planning tool that uses graphical representations of a company’s products and services in
an effort to help the company decide what it should keep sell or invest more in. The BCG growth share
matrix plots a company’s offerings in a four square matrix, with the y-axis representing rate of market
growth and the x-axis representing market share.
Howto use the BCG Matrix?
To look at each of these quadrants, here are some tips:
Dogs: The usualmarketing advice is to remove any dogs from your product portfolio as they are a
drain on resources.
However, some can generate ongoing revenue with little cost.
For example, in the automotive sector, when a car line ends, there is still a need for spare parts. As
SAAB ceased trading and producing new cars,a whole business has emerged providing SAAB parts.
Question marks: Named this, as it’s not known if they will become a star or drop into the dog
quadrant. These products often require significant investment to push them into the star quadrant. The
challenge is that a lot of investment may be required to get a return. For example, Rovio, creators of
the very successfulAngry Birds game has developed many other games you may not have heard of.
Computer games companies often develop hundreds of games before gaining one successfulgame.
It’s not always easy to spot the future star and this can result in potentially wasted funds.
3. Stars: Can be the market leader though requires ongoing investment to sustain. They generate more
ROI than other product categories.
Cash cows:‘Milk these products as much as possible without killing the cow! Often mature, well
established products. The company Procter & Gamble which manufactures Pampers nappies to Lynx
deodorants has often been described as a ‘cash cow company’.
Using the tool
Although BCG analysis has lost its importance due to many limitations, it can still be a useful tool if
performed by following these steps:
Step 1. Choose the unit
Step 2. Define the market
Step 3. Calculate relative market share
Step 4. Find out market growth rate
Step 5. Draw the circles on a matrix
Step 1. Choose the unit. BCGmatrix can be used to analyze SBUs,separate brands,products or a firm as
a unit itself. Which unit will be chosen will have an impact on the whole analysis. Therefore,it is
essential to define the unit for which you’ll do the analysis.
Step 2. Define the market. Defining the market is one of the most important things to do in this analysis.
This is because incorrectly defined market may lead to poor classification. For example, if we would do
the analysis for the Daimler’s Mercedes-Benz car brand in the passenger vehicle market it would end up
as a dog (it holds less than 20% relative market share),but it would be a cash cow in the luxury car
market. It is important to clearly define the market to better understand firm’s portfolio position.
Step 3. Calculate relative market share. Relative market share can be calculated in terms of revenues or
market share. It is calculated by dividing your own brand’s market share (revenues) by the market share
(or revenues) of your largest competitor in that industry. For example, if your competitor’s market share
in refrigerator’s industry was 25% and your firm’s brand market share was 10% in the same year,your
relative market share would be only 0.4. Relative market share is given on x-axis. It’s top left corner is set
at 1, midpoint at 0.5 and top right corner at 0 (see the example below for this).
Step 4. Find out market growth rate. The industry growth rate can be found in industry reports, which
are usually available online for free. It can also be calculated by looking at average revenue growth of the
leading industry firms. Market growth rate is measured in percentage terms. The midpoint of the y-axis is
usually set at 10% growth rate,but this can vary. Some industries grow for years but at average rate of 1
4. or 2% per year. Therefore,when doing the analysis you should find out what growth rate is seen as
significant (midpoint) to separate cash cows from stars and question marks from dogs.
Step 5. Draw the circles on a matrix. After calculating all the measures,you should be able to plot your
brands on the matrix. You should do this by drawing a circle for each brand. The size of the circle should
correspond to the proportion of business revenue generated by that brand.
Nestlé
“Nestlé” is a Swiss-German word which means “Little Nest” Nestlé is the worlds’ number one food
company. Nestle is 5th
largest company of the world according to its turnover. More than 2 million 31
thousand people employed from all over the world. It is one of largest diversified food company in
Pakistan with the widest product range.
5. NESTLE BCG Share Matrix
Star Question Mark
Mineral water
Nescafe
Ceralac
o Nesquik
o Magi Sauce
o Nestle Nestum
o Nescafe Decaf
Cash Cow Dog
Milkpak
Baby Food
Maggi Noodles
Chocolates
Juices
Nestea
Nestle dahi
Nestles market share in chocolate segment is 25% as compared to Cadbury 70%
Maggi sauce has a market share of 47% as compared to its competitor kissan with 26%
Nescafe market share in the instant coffee segment is 52% compared to Bru which has 43% of
market share.
Nestle has 80% market share in baby food segment.
It is a major contributor for Nestlé’s revenues with 68% market share compared to its competitor
Heinz.
Mineral water has a market share of 89% as compared to its competitor Aquafina with 22%
Milkpak has a market share of 65% as compared to its competitor Good milk with 35% and
Olpers 45%.
Maggi noodles has a market share of 70% as compared to top ramen 19%
80% market share in the Rs.1300 crore instant noodles segment.
Procter & Gamble
The Procter & Gamble Company, also known as P&G,is an American multinational consumer goods
company headquartered in downtown Cincinnati, USA. As of 2008, P&Gis the 23rd largest US company
by revenue and 14th largest by profit. P&Gis credited with many business innovations including brand
management, the soap opera, and "Connect & Develop" innovation. According to the Nielsen Company,
in 2007 P&Gspent more on U.S. advertising than any other company.
NESTLE BCG Share Matrix
BCG TITLE Brand Revenues Brand’s
market
share
Relative
market
share Market growth
rate
Star Mineral Water 2903040 32% 89% 85%
Cash Cow Milkpak 65% 55%
Question Mark Noodles 43% 75%
Dog Chocolates/Juices 10.2% 38% 40%
6. Family of Products :
Personal & Beauty
- Cosmetics, Oral Care,Hair Care
House & Home
- Laundry care,Dish Soap, Snacks & Coffee
Health & Wellness
- Prescription drugs, Health Care
Baby & Family
- Pet Care & Nutrition
NESTLE BCG Share Matrix
Star Question Mark
Pantene
Gillete
BraUn
Pampers
o Olay
Cash Cow Dog
Tide
H&S
Vicks
Oral B
Ariel
Pert
Cheer
Ambi pur
7. Vicks Vaporub is market leader in this segment with a share of 50%.
Vicks action 500 has around 40% market share
Vicks brand accounts for 40% of Company turnover, i.e. Rs. 170 Cr.
H&S is market leader for more than 35 years. As a result, over 90 million people in over 45
different countries have come to depend on Head & Shoulders® to help prevent dandruff.
Pamper has a market share of 35% as compared to its competitor Huggies with 22%