BCG Concept of Competitive Analysis &

Corporate Strategy

Presented byAmit Pramanik

Rahul SainiSamrat Kundu

Sruthi NairUjjawal Kishore

Gerald B. AllanBoston Consulting

Group, Boston, Massachusetts

Traditional Approach

BCG Concept

PRODUCT ROLE

ROLE

Cash flow

Cost potential

CASH FLOW

COST POTENTIAL

GROWTH

FUND SUPPLY

ABORT

PROCEDURE

Portfolio Strategy

Market Share Market Growth Rate

The Boston Consulting Group’s Growth-Share Matrix

Dogs 87

3 ?Question marks

? ?2

1

Cash cows

6

Stars

5

4

Mark

et

Gro

wth

Rate

Relative Market Share

High

Low

High Low

Star Strategies

Leader expanding industryGenerates large profitsRequires substantial investments to sustain growthFarthest down on experience curve relative to competitionIncrease sales – e.g. new markets, new channels of distributionIncrease market share

Problem Child or ?

Low market share in expanding industryNeeds substantial cash to improve its positionSlow progress on experience curveIncrease sales (limit to niche or increase market share (limit to niche)Leave market

Cash Cow

Leader in mature or declining industryCan generate funds for other SBUsMaintain market share e.g. ensure quality, build customer loyalty, develop substitute brandsMaximize Cash Flow e.g. increase usage rate, rate of replacement, modify expense structure, raise prices

Dogs

Low market share in a mature or declining industrySlow progress on experience

curveCost disadvantages and few

growth opportunitiesConcentrate on niches

requiring limited effort

Competitive Portfolio Analysis

Strategy Implications BCG

• Star – Leader in Expanding Industry– BUILD - Continue to increase market share – if

necessary at expense of short-term earnings

• Problem Child – Low market share in Expanding Industry– HARVEST if weak, BUILD if strong.– Assess chances of dominating segment. If good, go

after share. If bad, redefine business or withdraw.

• Cash Cow – Leader in mature or declining industry– HOLD - Maintain share and cost leadership until further

investment becomes marginal– Maximize cash flow

• Dogs – Low market share in a mature or declining industry– DIVEST Plan an orderly withdrawal so as to maximize

cash flow or concentrate on niches that require limited effort

Strategy Implications BCG

Product Dynamics

Assumptions of Growth /Share Matrix

1 2

Experience curve

Product life cycle

Issues with Growth/Share Matrix

Issue 1Issue 1 Issue 2Issue 2 Issue 3Issue 3

Neglects effect of synergy b/w business unit

Market growth is not necessarily related to cash usage.

Market share is not only success factor

Issue 4Issue 4

Multiple factors lead to profitability & Cash is not the only factor in evaluating a portfolio

Issue 5Issue 5 Issue 6Issue 6 Issue 7Issue 7

Low market share can also be profitable

Dogs can earn more than cash cows

Measurement problems

Issues with Growth/Share Matrix

Competitive Analysis of Product Portfolio

Internal

Balance

TrendsCompetitiv

e Evaluation

Products are appropriately distributed among the forth

quadrants

Projection of Trends for a product in the forth coming five year period

Product Portfolio charts for major competitors must be developed

Competitive Analysis of Product Portfolio

Industry Position

Financial

Balance

It can be obtained by plotting market growth against the

company’s own product growth

It is based on detailed cash flow calculation