© 2012 Pearson Education, Inc. publishing Prentice Hall. Note 32 Products— Product Portfolios

© 2012 Pearson Education, Inc. publishing Prentice Hall. Figure Note 32-1 The BCG Matrix 2

© 2012 Pearson Education, Inc. publishing Prentice Hall. Table Note Growth Rates and Market Shares for Selected Units of a Consumer Electronics Company 3

© 2012 Pearson Education, Inc. publishing Prentice Hall. Figure Note BCG Matrix for a Consumer Electronics Company 4

© 2012 Pearson Education, Inc. publishing Prentice Hall. Limitations of the BCG Matrix  The BCG framework assumes that:  Market growth rate and relative market share are enough, or that they, in fact, capture the effects of the other sources of attractiveness and strength  Either of these assumptions may not always be true  The BCG matrix treats market growth rate as a proxy for cash usage, because slow-growth markets are mature and presumably don’t require much investment  This is a problematic assumption, because mature markets are competitive and require cash 5

© 2012 Pearson Education, Inc. publishing Prentice Hall. Limitations of the BCG Matrix  In industries in which size does not lead to cost advantages, relative market share is not a good indicator for competitive advantages  Specific values or cut-off points along the axes of the matrix are somewhat arbitrary  Relative market share  Market growth rate  The BCG portfolio framework ignores synergies between business units or products 6

© 2012 Pearson Education, Inc. publishing Prentice Hall. Limitations of the BCG Matrix  The BCG Matrix is a snapshot  It captures the state-of-market growth and market share at a specific time, and does not consider changes or trends in the market or in the product/ SBU’s strength 7

© 2012 Pearson Education, Inc. publishing Prentice Hall. Figure Note The GE/McKinsey Portfolio Planning Grid 8

© 2012 Pearson Education, Inc. publishing Prentice Hall. Applying the GE/McKinsey Grid  Define and weight market attractiveness markers  Define and weight business strength markers  Evaluation each product’s or SBU’s market attractiveness and business strength  Compute weighted scores for market attractiveness and relative competitive position  Position business units in the portfolio  Derive strategic implications of positions within matrix 9

© 2012 Pearson Education, Inc. publishing Prentice Hall. Advantages of the GE/McKinsey Grid  Takes into account more market and company information and it leads to more specific strategic recommendations  The GE model can be applied at the level of business units, product lines, or single products, and other applications 10

© 2012 Pearson Education, Inc. publishing Prentice Hall. Limitations of the GE/McKinsey Grid  Greater subjectivity in this model at each step in the process than in the BCG Matrix  This subjectivity is problematic when planners are inexperienced and when they evaluate their own business units  A snapshot of strength and attractiveness at a particular time, unless trends are specifically incorporated into the summary variables 11

© 2012 Pearson Education, Inc. publishing Prentice Hall. Table Note Common Markers of Market Attractiveness and Business Strength 12

© 2012 Pearson Education, Inc. publishing Prentice Hall. Table Note Assessment of Market Attractiveness and Relative Competitive Position 13

© 2012 Pearson Education, Inc. publishing Prentice Hall. Figure Note GE/McKinsey Grid for a Consumer Electronics Company 14

© 2012 Pearson Education, Inc. publishing Prentice Hall. Figure Note GE/McKinsey Grid for Hypothetical Segments of Customers 15

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