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BCG Matrix

The document discusses the BCG matrix, which is a portfolio analysis technique developed in the 1970s by Boston Consulting Group. The BCG matrix analyzes business units based on their market share and market growth. It sorts business units into four categories: cash cows, stars, question marks, and dogs. The matrix provides a framework for allocating resources among different business units based on their classification. However, the BCG matrix is not without criticism, as it only considers two dimensions of analysis and does not account for all factors that influence long-term profitability.

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Devojit Bora
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280 views4 pages

BCG Matrix

The document discusses the BCG matrix, which is a portfolio analysis technique developed in the 1970s by Boston Consulting Group. The BCG matrix analyzes business units based on their market share and market growth. It sorts business units into four categories: cash cows, stars, question marks, and dogs. The matrix provides a framework for allocating resources among different business units based on their classification. However, the BCG matrix is not without criticism, as it only considers two dimensions of analysis and does not account for all factors that influence long-term profitability.

Uploaded by

Devojit Bora
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BCG Matrix

Which Provides Consulting Services To Various Businesses


they have divides the matrix which help to carry out a
portfolio analysis

Boston Consultancy Group Growth Share Matrix Commonly


Known As BCG Matrix Is A Famous Portfolio Analysis
Technique Developed By Boston Consultancy Group In The
1970`S. It Was Developed For Managing Portfolio Of Different
Business Units. The BCG Matrix Shows A Relationship
Between Products That Are Generating Cash And Products
That Are Eating Cash.

Large companies who want to be organized in Single


Business Units (SBU) face a challenge of allocation
resources among these units. The BCG Matrix shows various
business units on a graph of market growth v/s market share
relative to competitors. Resources are allocated to business
units according to where they are situated on the graph
Four Cells of a BCG Matrix
(A) Cash cows – It is a business unit with large market
share in a mature and slow growin g industry. Cash cow
require little investment and generate cash that can be used
to invest in other business units. These a generally large and
mature business units reaping the benefits of experience
and customer loyalty.

(B) Star – It is a business unit that has a large market share
in a fast growing industry. It may generate cash but due to
rapid growing market it requires investment to maintain its
needs. It is a high growth – high market share business unit.
These business units are generally in the growth stage of its
product life cycle and not self sufficient in terms of its
financial needs.

(C) Question mark? – It is also called the problem child. It is


a business unit which has a small market share in a high
growth market. Such a business unit requires huge
investment to grow market share but whether it will be a
star or not is unknown.

(D) Dogs – These are business units with a small market


share in a mature industry .A dog may not require
substantial cash but it ties up capital that could be invested
elsewhere. Such a business unit must be liquidated unless it
has some special strategic purpose or prospects to gain
market share in the future. 

The BCG matrix provides a framework for allocating


resources among different business units and allow one to
compare many business units at a glance.

Criticism of the BCG Matirx


♦ It is criticised that it does not reflect the true nature of the
business. The BCG Matrix considers only two dimensions
High and Low for measurement and while a business may
enjoy a high, medium or low market share/growth rate.

♦ It assumes that high market share always leads to high


profits which is not be true. High Costs are involved in
business units with large market share which may lead to
normal profits.
♦ There are many parameters to measure profitability other
than growth rate and market share. The BCG Matrix ignores
all other indicators of profitability. 

♦ The model does not clearly define the markets.

♦ Long term profitability of a business depends upon a


variety of factors which may not be related to market share
or growth. A business with low market share can also earn
high profits without needing large amount of investment.

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