BCG MATRIX

PRESENTED BY: AMIYA MOHAN DASH 5B

ANKUR AGARWAL
HARSHIT GARG

A company should have a portfolio of

products with different growth rates and
different market shares. The portfolio
composition is a function of the balance
between cash flows. Margins and cash
generated are a function of market share.
Bruce Henderson,
The Product Portfolio,
1970

ANKIT GOEL 6B

8B
21B

ANUJ KUMAR 9B
NAVEEN SHEORAN 29B

Introduction
It is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the
early 1970s
It classifies a companys SBU into 4 categories based on combination of market growth rate and
relative market share
Market growth serves as a proxy for industry attractiveness and relative market share serve as a
proxy for competitive advantage
The matrix helped companies decide which markets and business units to invest in on the basis
of two factorscompany competitiveness and market attractiveness
The logic was that market leadership, expressed through high relative share, resulted in sustainably
superior returns
In the long run, the market leader obtained a self-reinforcing cost advantage through scale
andexperiencethat competitors found difficult to replicate

Four categories of BCG Matrix

High

Question Mark

Stars represent business units having large market share in

a fast growing industry
They may generate cash but because of fast growing
market, stars require huge investments to maintain their
lead
SBUs located in this cell are attractive as they are located
in a robust industry
If successful, a star will become a cash cow when the
industry matures

Question marks represent business units having low

relative market share and located in a high growth
industry
They require huge amount of cash to maintain or gain
market share
Question marks are generally new goods and services
which have a good commercial prospective
There is no specific strategy which can be
adopted

Dog

Cash Cow

Low

MARKET GROWTH

Star

Cash Cows represents business units having a large

market share in a mature, slow growing industry
Cash cows require little investment and generate cash that
can be utilized for investment in other business units
These SBUs are the corporations key source of cash, and
are specifically the core business
The cash generated can be used to fund other
business units

Dogs represent businesses having weak market

shares in low-growth markets
They neither generate cash nor require huge amount
of cash
Due to low market share, these business units face
cost disadvantages
These business firms have weak market share
because of high costs, poor quality, ineffective
marketing, etc.

High

Low

RELATIVE MARKET SHARE

Utility of BCG Matrix

The utility of the matrix in practice in the field of strategic management is
twofold :
The matrix provided conglomerates and diversified industrial companies with a
logic to redeploy cash from cash cows to business units with higher growth
potential
Low-growth, high-share cash cows should be milked for cash to reinvest in
high-growth, high-share stars with high future potential

It also provided companies with a simple but powerful tool for maximizing the
competitiveness, value, and sustainability of their business by allowing them to
strike the right balance between the exploitation of mature businesses and the
exploration of new businesses to secure future growth