The BCG Matrix is also known as Growth-Share Matrix. The BCG Matrix (originally developed by the Boston Consulting Group) is used for developing marketing strategies and performing marketing analysis related to portfolio planning and analysis. The portfolio analyzed with the BCG Matrix is generally portfolio of products and/or services offered by the company or strategic business units (SBUs) managed by the company. In both cases the purpose of the BCG Analysis or BCG Chart / Matrix is to visually present the competitive positions of all business portfolio members. The competitive position of each portfolio member is based on its market share, market growth rate and size/revenue. This effective business analysis is used for company's current and future market analysis / estimate and competitive marketing positioning in the marketplace. By using this tool marketing managers better understand the marketplace and are able to effectively plan and optimize their current portfolio and allocate their marketing resources effectively.
BCG MATRIX - ALTERNATIVE POSITIONS There are four alternative positions in the BCG Matrix: (1) Question Marks, (2) Stars, (3) Cash Cows, and (4) Dogs.
1. Question Marks: The business unit has low market share compared to competitors, however it is doing business in high-growth market. Most of the new businesses start in this quadrant. There are well established businesses in this market and new businesses try to grow and capture more market share. This market is growing and there are opportunities for new businesses. At the same time there is risk involved with investing in this business – because of that these businesses are called question marks. Question Marks have to develop and grow by investing and continuously improving their business.
Grow sales by increasing market share. Use cash from Cash Cows to support required investments.
2. Stars: The business has high market share compared to competitors and it is doing business in high-growth market. This business is a market leader. Successful Question Marks will grow their business and capture more market share and will hopefully become Stars (move from the Question Marks quadrant to the Stars quadrant). Successful and competitive organizations have at least one star business unit or product. Stars have to improve their business continuously in order to keep their position in the marketplace. As long as this market is growing new question marks will try to capture new business.
Invest for sales growth and market share. Use cash from Cash Cows to support required investments.
3. Cash Cows: The market is not very attractive – low market growth rate, however the business has high market share compared to competitors. This business generates a lot of cash and helps the organization invest in other businesses. Since the market does not attract new players, this business does not need substantial investments to keep the market share. Cash Cows have to protect and keep the market share and maximize cash flow.
Maintain the strong market position and defend your market share. Take advantage of sales volume and leverage the size of operations. Support other businesses.
4. Dogs: This business has low market share and operates in low-growth market. It is unlikely that this business is very profitable – more likely this business is a loser. Such a business needs consideration and new strategy development. Potential strategies are withdrawal, selling the business, repositioning the current business, and operating cost reduction.
Optimize your current operations. Get rid of all non value added activities and features. Reposition your offering to generate positive cash flow or sell this business.
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