BCG(Boston Consulting Group) matrix
is developed by Bruce Henderson. According
to this technique, business or products are classified as low or high
performance depending upon their market growth rate & relative market
share.
Market
growth rate
Market Growth
is used as a measure of a market’s attractiveness.
MGR=(sales this year-sales last year)/sales last year
Relative
market share
Market share
is the percentage of the total market that is being serviced by your company
measured either in the revenue terms or unit volume terms. RMS=Business unit sales this year/Leading rivals sales this year
Stars
Stars are
leader in business. They also require heavy investment to maintain its large
market share. It leads to large amount of cash consumption & cash
generation. Attempts should be made to hold the market share otherwise
the star will become a cash cow
Cash Cows
They are
foundation of the company & often the stars of yesterday. They generate
more cash than required. They generate more cash than required. They extract
the profits by investing as little cash as possible. They are located in an
industry that is mature not growing or declining.
Question
marks
Most
business start of as question marks, They will absorb great amount of cash if
the market share remains unchanged (low), Question marks have potential to
become star & evenly cash cow but can also become dog. Investment should be
high for question marks
Dog
Dogs are the
cash traps. Dogs do not have potential to generate cash. Business is situated
at a declining stage
