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The BOSTON Matrix (BCG)

Prof. Nikunj Nayak V. M. Patel Institute of Management, GANPAT UNIVERSITY. P.O.M

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Some About THE BCG MATRIX

A means of analysing the product portfolio and informing decision making about possible marketing strategies Developed by the Boston Consulting Group a business strategy and marketing consultancy in 1968 Links growth rate, market share and cash flow.

Classification Of Boston Matrix:

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The BCG matrix focuses on three aspects.

The Growth of its market. Sales. Whether it absorbs or produces cash.

Above figure shows the four square BCG matrix in which business units can be plotted according to rate of growth of their market. Its goal is to develop a business among business units that use up cash and those than supply cash....

Let we research the situations of a company which have many departments in a single roof which is......

BAJAJ pvt.ltd.
In this business unit we can bifurcate this business according to the BCG matrix or in a 4 square method..
Chair Person Managing Director : - Rahul Bajaj. : - Rajiv Bajaj.

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BAJAJ PVT.LTD.

Above are the parts or running industries in the present market. We are going to decide the valuation of market according to the share capital, investments and net profit of all above groups of BAJAJ INDUSTRIES... Let see the followings numerical information regarding present valuation of it and also outsiders or competitors of this industries .after that we can reach towards the conclusion of the situation of market which is STANDARD, CASH COW, QUESTION MARK or a DOG...

Below are some statistical data regarding our industry...

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BAJAJ AUTO INDUSTRIES. 2010-11(in000) 2011-12(in000) 4795.20 4882.81 3004.05 3339.73 506580.37 -

DETAILS Investments Net profit Market capacity

BAJAJ ELECTRICLS

DETAILS 2010-11(In000) 2011-12(In000) Investments 36.58 44.06 Net profit 144.86 117.88 82451.20 Market Capacity -

BAJAJ HOLDINGS & INVESTMENTS

DETAILS Investments Net profit Market Capacity

2010-11(in000) 2011-12(in000) 4573.47 4249.22 1000.09 567.46 136926.30 -

BAJAJ GLOBEL
2010-11(In000) 0.36 0.32 ----2011-12(In000) 0.36 0.26 -----

DETAILS Investments Net profit Market Capacity

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Now, we can differentiate each group with all four categories...

STAR CATEGORY
Products in markets experiencing high growth rates with a high or increasing share of the market.

Potential for high revenue growth. We have a BAJAJ AUTO is a good example for understand it. According to the definition of STAR situation, more investment and more cash is a golden riles for getting more profit. The table defines that investments expands with the share capital and vice versa profit should be increases...
DETAILS 2010-11(in000) 2011-12(in000) Investments 4795.20 4882.81 Net profit 3004.05 3339.73 506580.37 Market capacity

Above table represents the Investments, N.P, and Market capacity of the BAJAJ Auto ltd. Here investments of 2012-13s are more than 201011s.Simmilarly market capacity of the company is also increases at increasing level. So position is

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that if you are paying or investing more you are going to more gain in the standard situation. Rules of Star Situation: GIVE MORE, GET MORE
In simple term More investments = More Profit. So the need to go on investing in order to keep up with the markets rapid growth may consume more cash than is currently being earned.

Now lets move on another situation....

THE CASHCOW

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(Cont.....)
Some numerical data Of BAJAJ ELECTRICLS.. High market share. Low growth markets maturity stage of PLC. Low cost support. High cash revenue positive cash flows. We have a good example of BAJAJ ELECTRICLS.In the cash cow high market share in a slowly growing market is both profitable and a source of excess cash. The slow growth of the market does not require large investments to maintain market position. In a simple term, if you have less investments you can get more profit. So BCG has to involve it In the standard situation of the CASH COW. Cash cow word defines here its value and meaning. If you have domestic cow then the expenses of the grass are low and you are getting more milk from that cow. If companys position is some like that then it should be a Standard condition...lets understand BAJAJ ELECTRICAL Ltd. from the following table.
DETAILS 2010-11(In000) 2011-12(In000) Investments 36.58 44.06 Net profit 144.86 117.88 82451.20 Market Capacity -

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Here we can see that the table defines investments, N.P & Market capacity of it. In this situation companys production expenses, advertisement or promotional expenses are low so it should be a saves sum of cash in a lot vice versa company is gaining much profit. So it is equal with the cow. As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. Because the cash cow generates a relatively stable cash flow, its value can be determined with reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow analysis. Lets talk about the question mark position

QUESTION MARK
Products having a low market share in a high growth market Need money spent to develop them May produce negative cash flow Potential for the future?

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Some details about this position...

DETAILS Investments Net profit Market Capacity

2010-11(in000) 2011-12(in000) 4573.47 4249.22 1000.09 567.46 136926.30 -

We can see clearly that investments are more in current year than net profit is also decreases in this situation Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is large net cash consumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.Thus this is

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situation of the question mark in a BAJAJ HOLDINGS & INVESTMENTS.Its bearing a great loss in the market

Lets move on the DOGS situation of the market

DOGS

Products in a low growth market. Have low or declining market share (decline stage of PLC). Associated with negative cash flow. May require large sums of money to support. One of the good groups of BAJAJ INDUSTRIES. It is BAJAJ GLOBEL.
DETAILS 2010-11(In000) 2011-12(In000) Investments 0.36 0.36 Net profit 0.32 0.26 Market Capacity ---------

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Here in this situation BAJAJ should be decided to dissolve this group because there is so loss according to the details... Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture. Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined solely by whether it had become the market leader during the period of high growth.. While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporation's business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units.

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NAME OF STUDENTS
1 2 3 4 5 6 Hetal Mistri Keyur Bhojak Akram Kaladia Chirag Gangani Meghal Bhavsar mayuri