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    MM Ansoff & BCG Matrix

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    Ashirbad Nayak
    The Boston Consulting Group (BCG) Matrix was developed in the 1970s to help corporations analyze their business units or product portfolios. It uses market share and market growth rate to categorize business units into four groups: Stars, Cash Cows, Question Marks, and Dogs. The matrix is used to help determine how resources should be allocated to each business unit by identifying which units have the greatest potential and which require divestment. It provides a framework for comparing a company's product portfolio and determining the best long-term strategy for each business unit.

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    MM Ansoff & BCG Matrix

    Uploaded by

    Ashirbad Nayak
    125 views31 pages
    The Boston Consulting Group (BCG) Matrix was developed in the 1970s to help corporations analyze their business units or product portfolios. It uses market share and market growth rate to categorize business units into four groups: Stars, Cash Cows, Question Marks, and Dogs. The matrix is used to help determine how resources should be allocated to each business unit by identifying which units have the greatest potential and which require divestment. It provides a framework for comparing a company's product portfolio and determining the best long-term strategy for each business unit.

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    Mm Ansoff & Bcg Matrix

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    The Boston Consulting Group (BCG) Matrix was developed in the 1970s to help corporations analyze their business units or product portfolios. It uses market share and market growth rate to categorize business units into four groups: Stars, Cash Cows, Question Marks, and Dogs. The matrix is used to help determine how resources should be allocated to each business unit by identifying which units have the greatest potential and which require divestment. It provides a framework for comparing a company's product portfolio and determining the best long-term strategy for each business unit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    125 views31 pages

    MM Ansoff & BCG Matrix

    Uploaded by

    Ashirbad Nayak
    The Boston Consulting Group (BCG) Matrix was developed in the 1970s to help corporations analyze their business units or product portfolios. It uses market share and market growth rate to categorize business units into four groups: Stars, Cash Cows, Question Marks, and Dogs. The matrix is used to help determine how resources should be allocated to each business unit by identifying which units have the greatest potential and which require divestment. It provides a framework for comparing a company's product portfolio and determining the best long-term strategy for each business unit.

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    BOSTON CONSULTING GROUP

    MATRIX
    INTRODUCTION

     BOSTON CONSULTING GROUP (BCG)


    MATRIX is developed by BRUCE
    HENDERSON of the BOSTON
    CONSULTING GROUP IN THE EARLY 1970’s.
     According to this technique, businesses or
    products are classified as low or high
    performers depending upon their market
    growth rate and relative market share.
     Links growth rate, market share and cash
    flow
    Relative Market Share
    and Market Growth
    To understand the Boston Matrix you need
    to understand how market share and
    market growth interrelate.
    MARKET SHARE
     Market share is the percentage of the total market
    that is being serviced by your company, measured
    either in revenue terms or unit volume terms.

    RELATIVE MARKET SHARE

     RMS = Business unit sales this year


    Leading rival sales this year

     The higher your market share, the higher proportion


    of the market you control.
    MARKET GROWTH
    RATE
     Market growth is used as a measure of a market’s
    attractiveness.

     MGR = Individual sales - individual sales


    this year last year
    Individual sales last year

     Markets experiencing high growth are ones where


    the total market share available is expanding, and
    there’s plenty of opportunity for everyone to make
    money.
    THE BCG GROWTH-SHARE
    MATRIX
     It is a portfolio planning model which is based on
    the observation that a company’s business units can
    be classified in to four categories:
     Stars
     Question marks
     Cash cows
     Dogs

     It is based on the combination of market growth and


    market share relative to the next best competitor.
    THE BCG GROWTH-SHARE

    MATRIX
    THE BCG GROWTH-SHARE

    MATRIX
    STARS
    High growth, High market share
     Stars are leaders in the category
     They also require heavy investment, to maintain its large market
    share
     It leads to large amount of cash consumption and cash
    generation- net cash flow is usually modest
     Potential for high revenue growth
     Products located in this quadrant are attractive as they are
    located in a robust category and these products are highly
    competitive in the category
     Attempts should be made to hold the market share ALAP
    otherwise the star will become a premature CASH COW
     If successful, a star will become a cash cow when the category
    matures (assuming they maintain their relative market share)
    CASH COWS
    Low growth , High market share

     They are foundation of the company and often the stars of


    yesterday
     They generate high cash revenue for the business: +ve cash
    flow
     They generate profits by investing as little cash as possible (low
    cost support)
     They need to be managed for continued profits & cash flow
     They are located in a category that is mature, not growing or
    declining
    DOGS
    Low growth, Low market share
     Dogs are the cash traps
     They neither generate cash nor require huge amount of cash ie.
    Dogs do not have potential to bring in much cash
     Associated with negative cash flow
     May require large sums of money to support
     Due to low market share, these products face cost
    disadvantages
     Dogs may generate enough cash to break-even, but they are
    rarely, if ever, worth investing in
     Unless a dog has some other strategic aim, it should be
    liquidated if there is fewer prospects for it to gain market share
     Number of dogs in the company should be minimized
     Product is situated at a declining stage of PLC
    QUESTION MARKS
    High growth , Low market share
     Most businesses start of as question marks
     They require huge amount of cash to maintain or gain market
    share
     Question marks have potential to become star and eventually
    cash cow but can also become a dog or exit
     Investments should be high for question marks: may produce
    negative cash flow!
     Potential for the future? Which ones to invest in? Which ones to
    get out or shrink?
    WHY BCG MATRIX ?

    To assess :
     Profiles of products/businesses
     The cash demands of products
     The development cycles of products
     Resource allocation and divestment
    decisions
    MAIN STEPS OF BCG MATRIX
     Identifying and dividing a company into SBU.
     Assessing and comparing the prospects of
    each SBU according to two criteria :
    1. SBU’S relative market share.
    2. Growth rate OF SBU’S industry.
     Classifying the SBU’S on the basis of BCG
    matrix.
     Developing strategic objectives for each SBU.
    BCG MATRIX WITH CASH FLOW
    STARS: What to do?

    • Huge potential
    • May have been expensive to develop
    • Worth spending money to promote
    • Consider the extent of their PLC in decision making

    Invest for sales growth and market share to build


    a star. Use cash from Cash Cows to support
    required investments.
    CASH COWS: What to do?

    • Cheap to promote
    • Generate large amounts of cash – use for further R&D?
    • Costs of developing and promoting have largely gone
    • Need to monitor their performance – the long term?
    • At the maturity stage of the PLC?
    • 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.
    DOGS: What to do?
    • Are they worth persevering with?
    • How much are they costing?
    • Could they be revived in some way?
    • How much would it cost to continue to support such
    products?
    • Low scale of economies: so difficult to make a profit
    • More likely this business is a loser
    • Needs consideration and new strategy development
    • Potential strategies are withdrawal, selling, repositioning,
    and reducing the operating cost
    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.
    ? MARKS: What to do?

    • What are the chances of these products securing a hold


    in the market?
    • Market is growing and there are opportunities for new
    businesses
    • How much will it cost to promote them to a stronger
    position?
    • Investment involves risk.
    • Is it worth it?

    Grow sales by increasing market share.


    Use cash from Cash Cows to support
    required investments.
    4 POSSIBLE STRATEGIES FOR
    EACH QUADRANT
    (1)Build: here the company can invest to increase market share
    (for example turning a "question mark" into a star)

    (2) Hold: here the company invest just enough to hold its
    present position

    (3) Harvest: here the company reduces the amount of investment


    in order to maximise the short-term cash flows and
    profits.
    (for example turning Stars into Cash Cows)

    (4) Divest: here the company can divest the product by


    phasing it out or selling it
    (in order to invest in more promising "question marks").
    BENEFITS
     BCG MATRIX is simple and easy to understand
     It helps you to quickly and simply screen the opportunities open
    to you, and helps you think about how you can make the most
    of them
     It is used to identify how corporate cash resources can best be
    used to maximize a company’s future growth and profitability
     The BCG Matrix produces a framework for allocating resources
    among different products and makes it possible to compare the
    product portfolio at a glance
    LIMITATIONS
     BCG MATRIX uses only two dimensions, relative market share
    and market growth rate. These are not the only indicators of
    profitability, attractiveness or success.
     It neglects the effects of synergy between brands
     Business with low market share can be profitable too
     High market share does not always lead to high profits. There
    are high costs also involved with high market share.
     At times, dogs may help the business or other products in
    gaining competitive advantage
     Sometimes, Dogs may earn even more than cash cows
    LIMITATIONS
    This four-celled approach is considered to be too simplistic

    Considers only MS & MG: this may tempt the management to emphasis
    investment on a particular product or to divest a product prematurely
    Neglects small competitors that have fast growing market shares
    CONCLUSION

    Though BCG MATRIX has its limitations it is one


    of the most FAMOUS AND SIMPLE portfolio
    planning matrix, used by companies having
    multi-products.
    ANSOFF GROWTH MATRIX

    This well known marketing tool was first published in the Harvard
    Business Review (1957) in an article called 'Strategies for
    Diversification'.

    It is used by marketers who have objectives for their business


    growth.

    Ansoff’s product / market growth matrix suggests that a business


    can grow depending on whether it markets new or existing
    products in new or existing markets.

    Ansoff's matrix offers strategic choices to achieve the growth


    objectives.
    ANSOFF GROWTH MATRIX
    Existing Markets Existing Products New Products

    Market Product
    Penetration Development
    New Markets

    Market
    Diversification
    Development
    ANSOFF GROWTH MATRIX
    1. Market Penetration

    Market penetration is a growth strategy where the business focuses on


    selling existing products in existing markets.

    Note: the product is same and does not seek any new customers ie. Sell more
    of the same thing to the same people.

    •A market penetration strategy is part of routine business

    •The business is focusing on markets and products it knows well

    •Likely to have good information on competitors and on customer needs

    •May not require much investment on market research.


    ANSOFF GROWTH MATRIX
    1. Market Penetration

    Market penetration strategy aims to achieve four main objectives:

    • Maintain or increase the market share of current products


    (this can be achieved by a combination of competitive pricing strategies,
    advertising, repositioning, sales promotion, more resources to personal selling)

    • Secure dominance of growth markets

    • Restructure a mature market by buying out or driving out competitors


    (aggressive promotional campaign, pricing strategy to make the market
    unattractive for competitors)

    • Increase usage by existing customers – loyalty schemes etc.


    ANSOFF GROWTH MATRIX
    2. Market Development

    Market development is a growth strategy where the business seeks to sell


    its existing products in new markets.

    Note: product remains the same, but it is marketed to a new audience ie.
    Sell more of the same thing to different people.

    Some of the possible ways of approaching this strategy:

    • Entry into new geographical markets

    • Introducing new product dimensions or packaging

    • Exploring new distribution channels

    • Offering different pricing policies to attract different customers

    • Creating new market segments


    ANSOFF GROWTH MATRIX
    3. Product Development

    Product development is a growth strategy where the business aims to


    introduce new products into existing markets.

    Note: develop and innovate new product offerings to replace existing ones
    and then market to existing customers ie. Sell more things to the same
    people.

    Extend the existing product by producing different variants, or packaging


    existing products in new ways: should appeal to existing markets

    Develop related products to address existing markets

    May require development of new competencies


    ANSOFF GROWTH MATRIX
    4. Diversification

    Diversification is a growth strategy where a business markets new products


    in new markets.

    Note: completely new products to new customers ie. Sell completely different
    products or services to different customers.

    More risk strategy because the business is moving into markets in which it has
    little or no experience.

    Must have a clear idea about what it expects to gain from the strategy and an
    honest assessment of the risks.
    (i) Related diversification: get into a new market or industry with which
    we are familiar

    (ii) Unrelated diversification: get into a new market or industry with which
    we have no previous experience

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