BCG Matrix

Contents ? Emergence of BCG Matrix Approaches of BCG Matrix Components of BCG Matrix Applications of BCG Matrix Advantages of BCG Matrix Limitations of BCG Matrix

The BCG Matrix . . . The Boston Consulting Group (BCG), founded in 1963, was a pioneering consulting. It introduced various concepts like ”experience curve” and ”growth-share matrix” Business growth rate High The experience curve says that the cost would come down to certain extent cumulative production is doubled. May establishments got an idea to minimize their cost and expand their capacity aggressively. Low However, when inevitable market downturns occured or innovative products were introduced, the flaws of this approach became apparent High Low Relative position (Market Share) Companies found themselves with excess capacity and outdated product designs, as well as reduced capacity for innovations given their previous focus on cost-cutting

Components of BCG Matrix Each of the four quadrants of the grid has different implication for the SBUs that fall into the category Stars ? Question marks Stars are SBUs that compete where there is high market share and high-growth industries. Question marks are SBUs which have weak market shares but they compete in high-growth industries. Cash cows Dogs Dogs are SBUs which operate in low-growth industries with weak market shares. Cash cows are SBUs which operate in high market shares but in low-growth industries.

BCG Matrix application Business growth rate Invest if needed to create cash cow Select a few Divest the others High Liquidate Low High Low Relative position (Market Share)

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