Benefits of BCG-Matrix

Organizations that are very large such that they require setting up business units
usually face the test of the allocation of resources among those business units. The
BCG matrix was developed by Boston Consulting Group for the management of
various business units. Using the BCG opens an organization to several benefits such
as :
1. SimplifiesManagement
The BCG is an effective management tool and it offers a good framework for
resource allocation among various units. This enables the managers to
compare several business units whenever they want. It simplifies many
business factors through showing employees the market share as well as
growth rate and how to use them to create new strategies.
2. PopularMatrix
Even though BCG matrix may be among the oldest matrices ever formulated,
it is also the most common and best known matrix taught all over the world.
There are forums on the internet where individuals share their ideas on the
best methods of using BCG matrix because of its popularity. This means that
those looking to use it will never lack assistance and support. The BCG still
remains a quick and beneficial guide for resource allocation and ensuring
better profits.
3. BetterDecisionMaking
The BCG allows for the making of comparisons so as to measure the growth
and development rate of a company against the average growth rate in that
specific industry. In addition, this particular matrix is also enjoyable to use,
encouraging better decision making. Large organizations that are normally in
need of effective decision making can benefit a lot from using BCG matrix,
especially
those
seeking
better
resource
management.
Nevertheless, the BCG model only takes into account two dimensions, which
are growth rate and market share. This might tempt the management to focus
on a certain product or divest prematurely.

Limitations of the BCG-Matrix:

It neglects the effects of synergies between business units.

High market share is not the only success factor.

Market growth is not the only indicator for attractiveness of a market.

Sometimes Dogs can earn even more cash as Cash Cows.

The problems of getting data on the market share and market growth.

There is no clear definition of what constitutes a market.

A high market share does not necessarily lead to profitability all the time.

The model uses only two dimensions market share and growth rate. This
may tempt management to emphasize a particular product, or todivest
prematurely.

A business with a low market share can be profitable too.

The model neglects small competitors that have fast growing market shares.