Bcg matrix (boston consultancy group matrix)

1. BCG MATRIX

2. The BCG Matrix is a tool used by organizations to
assess the value of the products that they offer in
terms of their growth (i.e., how desirable the product
on the market will be) and market share (i.e.,
competitive advantage). Using the model, an
organization can determine which products are a
worthwhile investment of company money and
employee time and effort.

3. What is the BCG Matrix?
The Boston Consulting group’s product portfolio
matrix (BCG matrix) is designed to help with long-
term strategic planning, to help a business consider
growth opportunities by reviewing its portfolio of
products to decide where to invest, to discontinue, or
develop products. It's also known as the
Growth/Share Matrix.

4. According to this matrix, business could be classified
as High or low according to their industry growth
rate and relative market share.
Relative Market Share = SBU (Strategic Business
Unit) Sales this year leading competitors sales this
year.
Market Growth Rate = Industry sales this year -
Industry Sales last year.

6. Creating your matrix
To analyze your own company, first, you'll need
data on the relative market share and growth rate of
your products or services.
When examining market growth, you need to
objectively determine your competitive advantage
over your largest competitor and think in terms of
growth over the next three years. If your market is
extremely fragmented, however, you can use
absolute market share instead.

9. Here is a breakdown of each BCG matrix quadrant:
Stars: The business units or products that have
the best market share and generate the most cash are
considered stars. Monopolies and first-to-market
products are frequently termed stars. However, because
of their high growth rate, stars consume large amounts of
cash. This generally results in the same amount of
money coming in that is going out. Stars can eventually
become cash cows if they sustain their success until a
time when a high growth market slows down.

10. High Growth, High Market Share
Stars. Products that are in high growth markets and
that make up a sizable portion of that market are
considered “stars” and should be invested in more. In
the upper left quadrant are stars, which generate high
income but also consume large amounts of company
cash.

11. Cash Cows: A cash cow is a market
leader that generates more cash than it consumes. Cash
cows are business units or products that have a high
market share but low growth prospects. A cash cow is a
product, asset, or business that ensures a consistent
cash flow. In the Boston Consulting Group (BCG)
matrix, cash cows are placed in the bottom right
position—high market share but low growth rate. Out
of many products, a particular product becomes
responsible for generating a huge chunk of profits for a
company. Such products are called cash cows or
moneymakers.

12. They become market leaders due to their huge customer base
and low production cost.
Key Takeaways
1. Cash cows are well-established products that generate
constant profits in the long run.
2. It is one of the four grids in the Boston Consulting Group
(BCG) matrix and resembles an enormous market share
with a nominal growth rate.
3. Also termed a money maker, it yields regular returns, just
like a cow that provides milk regularly.
4. Companies focus on these moneymakers to fund other
ventures, maintain customer loyalty, and enjoy
scalability.

13. Cash Cows in BCG Matrix
The Boston Consultancy Group (BCG) matrix, has four grids or
divisions, i.e., the question mark, stars, dogs, and cash cows.
Now, the BCG matrix runs across two parameters, market
share on the x-axis and market growth on the y-axis.
On the BCG quadrant, moneymakers reflect the following:
 Large Market Share: Such a product, asset, business unit, or
firm captures the market substantially. They have been
popular among consumers for a long period. They have
customer loyalty, high production, economies of scale, and
low manufacturing cost.
 Low Market Growth Rate: The scope for growth, though, is
meager. The product does not require increased investment.
It continues providing consistent returns as it is.

14. Strategy
Moneymakers are essential for any business; they fund other projects.
Therefore, it requires smart management to reap the maximum benefit.
Following are the prominent strategies to achieve that:-
Marketing: In some cases, like when a new competitor enters the market
with an identical product, marketing the money maker becomes crucial.
Budgeting: It is necessary to plan future revenue and spending to ensure an
uninterrupted supply that can keep up with the market demand.
Prioritizing: The priority can be sales maximization or profit-making. The
money maker cannot fulfill both.
Creating a Product Mix: The money maker can be improved by adding new
features and by developing a unique product mix.

15. Dogs: Dogs, or pets as they are sometimes
referred to, are units or products that have both a low
market share and a low growth rate. They frequently
break even, neither earning nor consuming a great deal
of cash. Dogs are generally considered cash traps
because businesses have money tied up in them, even
though they are bringing back basically nothing in
return. These business units are prime candidates for
divestiture

16. 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" product

17. Question Marks: These parts of a
business have high growth prospects but a low market
share. They consume a lot of cash but bring little in
return. In the end, question marks lose money.
However, since these business units are growing
rapidly, they have the potential to turn into stars in a
high growth market. Companies are advised to invest in
question marks if the product has the potential for
growth, or to sell if it does not.
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.

18. Products in the question marks quadrant are in a market that
is growing quickly but where the product(s) have a low
market share. Question marks are the most managerially
intensive products and require extensive investment and
resources to increase their market share.
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.

19. Using the BCG matrix to strategize
Now that you know where each business unit or
product stands, you can evaluate them objectively.
In an article on Marketing 91, author Hitesh Bhasin
outlines four potential strategies you can follow
based on the results of your BCG matrix analysis:-
 Increase investment in a product to increase its
market share. For example, you can push a
question mark into a star and, finally, a cash cow.
 If you can't invest more into a product, hold it in
the same quadrant, and leave it be.

20.  Reduce your investment and try to take out
the maximum cash flow from the product,
which increases its overall profitability (best
for cash cows).
 Release the amount of money already stuck in
the business (best for dogs).
You need products in every quadrant of your BGC
matrix to keep a healthy cash flow and have
products that can secure your future.

21. The role of cash flow in the BCG matrix
Understanding cash flow is key to making the
most of the BCG matrix. In 1968, BCG founder
Bruce Henderson noted that four rules are
responsible for product cash flow:
 Margins and cash generated are a function of
market share. High margins and high market
share go together.

22.  To grow, you need to invest in your assets. The
added cash required to hold share is a function of
growth rates.
 High market share must be earned or bought.
Buying market share requires an additional
increment or investment.
 No product market can grow indefinitely. You
need to get your payoff from growth when the
growth slows; you lose your opportunity if you
hesitate. The payoff is cash that cannot be
reinvested in that product.

23. That last point is even more important now than
ever. The market moves more quickly now than it
did 40 years ago, and BCG has since published
recommended revisions to analyze and act on the
matrix information.
Maintaining a healthy supply of question marks
readies you to act on the next trend. Cash cows,
conversely, need to be milked efficiently, because
they may fall out of favor – and profitability –
more quickly. You can find more strategies
on BCG's website.

24. Question marks: Products with high market growth
but a low market share.
 Stars: Products with high market growth and a
high market share.
 Dogs: Products with low market growth and a
low market share.
 Cash cows: Products with low market growth
but a high market share.

27. The quadrants of the BCG Matrix are split into the
following four categories:--
1. Cash cows (low growth, high share)
2. Stars (high growth, high share)
3. Question marks (high growth, low share)
4. Dogs (low growth, low share)

28. BCG Matrix
Stars:-
These are well established
products or brands with
fantastic opportunities to
generate large amounts of
ROI.
 High growth market
 High market share
 Cash neutral
Question Marks:-
Unsure in which direction
these products will go.
Known as the problem
child(s), they can be turned
into stars or end up as
dogs.
 High market growth
 Low market share
 Cash absorbing
 Build

29. BCG Matrix
Cash Cows:-
These are well-established
and consistently produce
cash, however the growth
opportunities are limited.
Low market growth
High market share
Cash generating
Milk
Dogs:-
Products which have little
or no value. They are a
drain on resources and
cash. It is often difficult to
make a profit from dogs.
Low market growth
Low market share
Cash neutral
Diversify

30. BCG Matrix of Apple

31. BCG Matrix of Nestle

32. BCG Matrix of McDonalds