# BCG Growth1

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## Presentation Transcript

### BCG Growth/Share Matrix:

BCG Growth/Share Matrix Presented by: Dirk Kamphaus and Danny Yates

### Presentation Outline:

Presentation Outline History of BCG Matrix Brief explanation of portfolio analysis BCG Matrix construction Strategy recommendations Evaluation of the tool

### History of the BCG Matrix:

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

### Portfolio Analysis:

Portfolio Analysis Strategic Business Unit (SBU) Definition Single independent operation of a company Has its own competitors One manager responsible for performance Allocation of resources over all SBUs Goals Set benchmarks Create generalized descriptions of strategic situations

### Basis of the BCG Portfolio Matrix:

Basis of the BCG Portfolio Matrix

### BCG Matrix Construction:

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

### BCG Matrix Format:

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

The BCG Matrix

### Strategy Recommendations :

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

### Strategy Recommendations:

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

### Strategy Recommendations:

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

### Strategy Recommendations:

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

### Evaluation of BCG Matrix: Cons:

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 Can fall prey to the “GIGO” syndrome

### Evaluation of BCG Matrix: Pros:

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

### Conclusion:

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