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Understanding the BCG Matrix

   

Added on  2020-03-01

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Running head: BUSINESS STRATEGYBusiness StrategyName of the StudentName of the UniversityAuthor Note
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1BUSINESS STRATEGYThe Boston Consulting Group (BCG) Matrix is also known as the Portfolio Managementtool, which was developed in the 1970s. The main purpose of this matrix is the determination ofthe priorities that will be given to the products in a business unit. For the companies, to ensurethat their products have a long-term value for the products that are created by them, they need tomanufacture products that are high in growth, which needs lots of cash along with products thathave low growth so that it can help in generating cash. The matrix contains of market share andmarket growth, which are the two broad dimensions that help in understanding the matrix. Theprimary idea behind this concept is to understand if the product can create a larger share in themarket or the rate at which the product is growing in the market, which will benefit the company(Shanbhag, Dutt and Bagwe 2016). Segments in the BCG matrixThe products are placed in the matrix within the four categories, which are as follows:Stars (high share in the market, high growth)This category indicates that the products are using heavy amounts of cash and are leaders in thebusiness within the market. these products also help in generating large amount of cash. The starproducts are mainly on balance in the net cash flow statement of the company. the shares of theseproducts need to be kept by the company so that the rewards are high, if the market shares arekept for the star products then the reward will be the cash cows (Palia, De Ryck and Mak 2014). Cash Cows (high share in the market, lo growth)These products help in generating more amounts of cash, as they are the profitable products inthe market. These products do not enjoy lot of growth in the market, which is the reason for the
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2BUSINESS STRATEGYinvestment to be made lower in nature. These products help the company to get established in themarket, as the demand of the consumers are high with respect to the product. These products stayfor a lesser period in the market, as the primary function is to establish the company within thecompetitive market environment (Tao and Shi 2016). Dogs (low share in the market, low growth)The company needs to minimize or avoid the dog products so that it helps them to stay afloatwithin the competitive market environment. The companies need to plan for an alternative route,which is the rescue plan so that they can survive in the market if the dog products fail in themarket. These products need to help the company by generating large amounts of cash or else thecompany must liquidate the products to ensure its survival in the market (Guta 2017). Question marks (low share in the market, high growth)These products have the lowest returns in cash and uses up huge cash in the process ofmanufacture. These products significantly have low shares in the market place, as they do nothelp in generating large amounts of cash for the company. The shares in the markets of theproducts, if not changed in a proper manner will absorb the cash that is allocated for the otherproducts. The companies need to invest heavily or noting or sell off the products so that it canhelp in generation of cash (Aithal 2016). The strategies in BCG matrixThe BCG matrix helps in understanding the methods, which may lead to mistakes whiledeveloping the strategies, which will help in developing the strategy that will help the companyin all ways such as the growth target that is generic in nature along with the return on capital that
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