1. BCG Growth/Share Matrix

2. History of the BCG Matrix
1960’s – diversification of businesses
Need for universal management tool
First implementation in 1969 by Boston Consulting Group

3. Portfolio Analysis Strategic Business Unit (SBU) Definition
Single independent operation of a company
Has its own competitors
One manager responsible for performance
Has a different set of requirements of resources
Allocation of resources over all SBUs

4. Basis of the BCG Portfolio Matrix
Time
Introductory Phase “?”
Growth Phase “Star”
Sales Volume
Mature Phase “Cash Cow”
Decline Phase “Dog”

5. BCG Matrix Construction
Internal measure: Relative market share
Firm’s sales of the SBU . Total market’s average sales
Firm’s Sales of the SBU . Strongest Competitor’s Sales
External measure: Market growth
Match strategy with market stage

6. BCG Matrix Format Vertical Axis = Relative Market Growth
Split at 10% by a horizontal line
Horizontal Axis = Relative Market Share
Split at 1x by a vertical line
Creates four quadrants in which individual SBUs are positioned as bubbles
Bubble size = SBU’s total revenue

7. The BCG Matrix Relative Market Share High Low
Product Sales Growth Rate
Relative Market Share

8. BCG Market Share/Market Growth Matrix

9. Strategy Recommendations
Investment
Increase market share
Selectively develop into Stars
Cash Flow
Require funds from other SBUs (Cash Cows)
Unrealized future opportunities

10. Strategy Recommendations
Investment
Further Growth
Maintain Market Position
Cash flow
Self-sustaining: Fund their own growth
Require funds from other SBUs (Cash Cows)
Assure the future of the company
Grow into Cash Cows

11. Strategy Recommendations
Investment
Maintain market share
Maintain capacity
Cash Flow
Positive cash flow
Provides funding to support Stars and “?”
No potential for profit growth

12. Strategy Recommendations
Investment
Divestiture strategy
Reduce capacity to free up resources
Cash Flow
Goal of Positive Cash Flow
Negative Cash Flow = Divestment
No real growth opportunities

13. Evaluation of BCG Matrix: Cons
Oversimplifies complex decisions
Only 2 factors considered = creates risk
Uncertainty in market and SBU definition
Only considers current businesses no dynamics
Does not recognize possible synergies between SBUs

14. Evaluation of BCG Matrix: Pros
Simple and rapid
Solid basis for decision-making
Good measurability of market share and growth
Provides information about efficient resource allocation within the organization
Generator for strategic options

15. Conclusion
As long as management understands that the BCG Growth/Share Matrix generates options which require further analysis and validation, this tool can greatly enhance strategic decision making