The BCG Matrix (Boston Consulting Group) is a tool for developing and managing strategic plans to maintain the competitiveness of a particular firm. It includes an analysis of the development and income generation of individual divisions of the firm. Its goal is to redistribute investments and investments, depending on the forecast for the development of a particular unit in the future.
Instructions
Step 1
The BGK matrix consists of four squares located on the coordinate axis. In this case, the X-axis is the market growth rate, and the Y-axis is the market share occupied by a particular division, in relation to the share occupied by the main competitor.
Step 2
The coordinate space of the abscissa axis is divided as follows: from 0 to 1 - in increments of 0, 1, and then from 1 to 10 - in increments of 1. Market share is estimated according to the sales of all industry participants and is defined as the ratio of own sales to sales of the main competitor, or three strongest competitors. 1 means that own sales are equal to sales of the strongest competitor.
Step 3
The ordinate axis shows the rate of market growth in accordance with each division. All products of the firm are taken into account, and the value can be negative with a negative growth rate.
Step 4
At the very bottom of the coordinate axis is a square corresponding to the type of unit with the symbol "Dogs" ("Lame ducks", "Dead weight"). The lower right corner corresponds to zero on the abscissa and ordinate axes. These units have the lowest market share and the lowest profit, and the product is the least in demand. At the same time, there is an active consumption of investments.
We need to get rid of "Dogs" by curtailing production.
Step 5
To the left of the abscissa is a square indicating the type of cash cows unit. Such divisions are characterized by a high occupied market share, bring low but stable income. The product is in low demand, but "Cows" do not require additional investment, which explains their value.
The funds received from Cash Cows are invested in the development of Stars and Difficult Children.
Step 6
Above the "Cows" is the "Stars" square. These are the most profitable business units with the largest market share. The product is in great demand.
To maintain market share, strengthen and expand production, additional investments and investments are required. Therefore, the net cash flow from Zvezd is rather low.
Step 7
To the right of the "Stars" above the "Dogs" is the "Difficult Children" square ("Dark Horses", "Question Marks", "Wild Cats"). Represents a type of business unit that generates high profits, but occupies a small market share. The product is in high demand. High growth rates.
Difficult Children must be watched closely. In the future, they can become both "Stars" and "Dogs". If there is free investment, it should be invested in Children in order to transfer them to Stars. If this is not possible, “Difficult Children” should be disposed of.
Step 8
The disadvantages of the BGK matrix are sufficient due to the strong simplification of the situation under consideration. Only two factors affecting profit are taken into account, but in fact there are many more of them. In addition, it does not take into account the fact that the removal of “Dogs” from the matrix can lead to an increase in the price of “Stars” and “Children”, which will negatively affect their market share, and therefore lead to a decrease in profits.
On the other hand, the matrix is visual, easy to build, easy to understand. With its help, you can quickly analyze individual business units, proportioning the possibilities of their development in the future with respect to the available investment portfolio.
