BCG Analysis, Boston Consulting Group, BCG Matrix

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BCG abbreviates to Boston Consulting Group

BCG Analysis is basically related with marketing, branding and advertisement. It is often used for the products strengths and weaknesses. B.C.G matrix was developed by the great and famous Boston Consulting Group in the year 1970’s. They have given several terms in this marketing that the product has been used to rate it as per the share of the market, as per the market growth and there is a relation between product and the market share. These analyses have been done on the basis of both the two. Bruce Henderson of Boston consulting group have been developed the portfolio of planning model which is basically based on the fact that market share as well as market growth which is related to the highest competitor.

There are two different terms which are preferable and in demand in BCG analysis and that are industry attractiveness and competitive advantage. Market growth refers to industry attractiveness and market share refers to competitive advantage. It determines the business profits, the profitability in the business and the growth in the business. It also represents the cash flows in the business; it talks about the sales volume in the business and many more. There are circles in the matrix figure which indicates the presence of product and brand. The sales volume which is represented in the form of size.

The growth share matrix of BCG is divided basically into four main categories:

Those are:

1. Dogs

2. Question marks

3. Stars

4. Cash cows

Dogs have very low share of the market, dogs have very low growth rate in the market, and Dogs don’t create lot of profits because they don’t have such a useful and important market share and rate. They are unable to generate such a high amount and also dogs are unable to adopt more level of consumption. They can’t either make or take the money. In this type of business, there is very little amount of work and potential which occurs and thus dogs suffer from the point of money and profitability. It cannot create lot of profit.

Question marks in this type of matrix it is growing very large and also can’t generate large amount of cash, this type also able to consume large amount of money but they also have low shares of market, they don’t have high market share. Question mark has the potential to achieve or gain high market share. They have high potential to reach the next level that is star. Question mark has the ability to gain the market share and go to the star and if the market growth slows down, it can move into dogs if they don’t get the good market growth and good market rate.

Stars have no doubt large and very high relative shares of market, they have strong market share. Large amount of cash gets consumed by stars because they have high growth rates. It will move into cash cow if it will hold large share of market and if the share gets down.

Cash cows are the leaders in the market and they have good rate and growth of the market. They generate high amount of cash than they consume. They can also turn into the question mark and become the leaders in the market. Cash cows also generate stable amount and stable cash flows in the company. Cash cow turns into dog at the last and final end stage of this matrix.

They have certain limitations:

The industry attractiveness and the competitive advantage.

1. Industry attractiveness is the only factor of market growth rate and competitive advantage is the only factor of market share.

2. No business unit is dependant of others.

3. Dog is a helping hand in other businesses to achieve the competitive advantage.

4. Market share is risky and it not creates the factor of success.

5. It has only two dimensions that are market growth and market share.

This BCG matrix is based on the theory of product life cycle. It is helpful for the company and for the managers in the company to evaluate the balance in the BCG matrix of cash cows, stars, question marks and dogs. It is a basic and a base for managers to take the further actions, to proceed to the future plans, to decide the future benefits of the business. This model is not that hard to understand.

BCG matrix identifies the priority which needs to given first to the business for better growth. It helps to understand the strategies which will fit all the strategies as per the size of the business. It is applicable in large companies which want large volume of sales. Management’s job becomes easy when they take care of this matrix. It is very simple and easy to understand about the sales volume and size as well the growth.