Describe the BCG matrix as used as a corporate business portfolio analysis tool

      

Describe the BCG matrix as used as a corporate business portfolio analysis tool.

  

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Simon
The BCG [Boston Consulting Group} matrix is a four celled matrix developed by BCG, USA. It is the most renowed corporate portfolio analysis tool. It provides a graphical representation for an organization to examine different businesses in it’s portfolio on the basis of their related market share and the industry growth rate. It is a comparative analysis of business potential and the evaluation of the environment.
According to this matrix, business could be classified as low or high according to their industry growth rate and the relative market share. Market growth rate is Industry sales this year – industry sales last year. The analysis requires that both measures be calculated for each SBU.
The BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting the market growth rate. The midpoint of relative market share is set at 1.0. If all SBU are in the same industry, the average growth rate of the industry is used. If all the SBU’s are located in different industries, then the midpoint is set at the growth rate of the economy.
The four cells matrix are stars, cash cow, question mark and dogs.
Stars; they represent business units having large market share in a fast growing industry. They may generate cash but due to the fast growing market they require huge investments to maintain their lead. SBU’S located in this cell are attractive since they are located in a robust industry and they are highly competitive. If successful, a star may become a cow when the industry matures.
Cashcow; They represents business units having large market share in a mature, slow growing industry. They require little investments to maintain yet the cash generated can be used to invest in other businesses. They are usually the core business of the organization and mostly they follow stability strategies.
Question mark: They represent business units having low market share in a high growing industry. They require huge amount of investment to maintain. They are generally new goods and services that have a good commercial prospective, therefore they require a lot of attention to determine whether the venture is viable. There is no a specific strategy that can be adopted.
Dogs: They represents businesses with low market share in a slowly growing market. They neither require huge amount of finance to maintain neither do they generate huge amount of cash. Due to low market share, these businesses face cost disadvantages.

skilled writter answered the question on April 1, 2018 at 18:17


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