Stars | Cash Cows | Question Marks | Dogs |
High share | Low growth
High share | High growth
Low share | Low growth
Low share |
Business is likely to generate enough cash to be self sustaining. Recommended tactics: * promote aggressively * expand your product or service * invest in R & D | Business can be used to support other business units. * defend &maintain | Business requires a lot of cash to maintain market share. * invest more cash * or, divest | Business is a cash trap. * focus on short term * avoid risky project * limited future |
Description of the Model
One axis shows the market share relative to the industry leader which is always the leftmost circle.
The other axis shows market growth rate for the industry.
A circleis drawn for each competitor. The size of each circle represents that company's dominance. Characterize Your Enterprise
The expert system will position your enterprise on the chart based upon your description of:
* share of market
* condition of the market
You can trace through the supporting analysis and its conclusions, adjusting your input until you are satisfied your descriptionaccurately characterizes your enterprise.
BCG Growth-Share Matrix
Companies that are large enough to be organized into strategic business units face the challenge of allocating resources among those units. In the early 1970's the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines). The BCG growth-share matrix displays thevarious business units on a graph of the market growth rate vs. market share relative to competitors:
BCG Growth-Share Matrix
Resources are allocated to business units according to where they are situated on the grid as follows:
* Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash thatcan be used to invest in other business units.
* Star - a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures.
* Question Mark (or Problem Child) - a business unit that has a small marketshare in a high growth market. These business units require resources to grow market share, but whether they will succeed and become stars is unknown.
* Dog - a business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should beliquidated if there is little prospect for it to gain market share.
The BCG matrix provides a framework for allocating resources among different business units and allows one to compare many business units at a glance. However, the approach has received some negative criticism for the following reasons:
* The link between market share and profitability is questionable since increasing market sharecan be very expensive.
* The approach may overemphasize high growth, since it ignores the potential of declining markets.
* The model considers market growth rate to be a given. In practice the firm may be able to grow the market.
These issues are addressed by the GE / McKinsey Matrix, which considers market growth rate to be only one of many factors that make an industry attractive, andwhich considers relative market share to be only one of many factors describing the competitive strength of the business unit.
Marketing Mix: Place
This refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time. Efficient and effective...
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