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PowerPoint Diagram Pack

BCG Growth-Share Matrix

Y%

Star
Product A

Question Mark

Created by Bruce Henderson of the Boston Consulting Group (BCG), this framework is used to help an organization analyze and make strategic decisions around its business units, product lines, or individual products.

Product C E

Industry Growth
Product B Product D

X% Z

Cash Cow
Relative Market Share

Dog
0

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BCG Growth-Share Matrix Introduction

What It Is  Developed by BCG, the growth-share matrix displays graphically in a 2-by-2 matrix the position of each business of a companys portfolio or compares the position of players in one industry.  The growth share matrix is based on the use of industry growth and relative market share (RMS) as proxies for: The competitive position of a firm in its industry (RMS). The attractiveness of the segment (growth)  The matrix has the following quadrants which have different cash flow characteristics and implications: Why We Use It  Provides a framework to suggest the kind of investment strategy to follow for each business.  Assess trends in the evolution of a companys portfolio of business (when matrix is drawn for both the current year and past years).  Understand the competitive position of each business, possible cash requirements and focus attention on key issues. Strengths & Limitations

 Strengths: Coherent and simple framework. Good starting point for thinking about a firms portfolio.  Limitations: May fuel simplistic conclusions: The matrix assumes that high relative market share automatically Quadrant Relative Share Market Growth results in high cash generation. This is not true in all industries. Star High High Cash cows High Low THIS IS A PARTIAL the interpretation that cash generation is more important Can lead to PREVIEW Dogs Low Low than profit generation. Question marks Low High You can preview the full PowerPoint document and cash cow when it Can also lead to wrong behavior, i.e. milking of needs investment (typically when industry  The key idea is that business units located in download it at http://learnppt.com/powerpoint/changes). each of the quadrants will be in fundamentally Very rare that a companys businesses are truly independent. different cash flow positions and should be May neglect niche strategies. managed differently.

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BCG Growth-Share Matrix Definitions

QUADRANT LABEL DEFINITION

Cash Cow

Cash cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.

Dog

Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off. Question marks (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

Question Mark

THIS IS A PARTIAL PREVIEW

Star

You can preview the full PowerPoint document andis that stars become the Stars are units with a high market share in a fast-growing industry. The hope next cash cows. Sustaining the market require download it that's what it takesbusiness unit'sremain aleadership maygrowth slows, stars become is at http://learnppt.com/powerpoint/ extra cash, but this worthwhile if for the unit to leader. When
cash cows if they have been able to maintain their category leadership, or they move from brief stardom to dogdom.

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BCG Growth-Share Matrix Framework Diagram / Sample Output

Y%

Star
Product A

Question Mark

PRODUCT

DETAILS

Product A

Product B
Product C

Industry Growth
Product D Product B

Product C

Product D

Product E

THIS IS A PARTIAL PREVIEW

X%

Cash Cow
Z

You can preview the full PowerPoint document and 0 download it at http://learnppt.com/powerpoint/ Relative
Market Share

Dog

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Growth Share Matrix Top Tips

Potential Insight  The growth share matrix suggests the following strategies for each business unit type: Expected Cash Typical Strategic Typical Strategic Characteristics of Each Prescriptions Movement Prescriptions Quadrant of the Market
High
Star Cash in Balance Dilemma Build/ hold share Build Market Share selectively
Do nothing if cash is positive Invest or turn to a star Divest if not critical SBU

Cash Users

Rate of market growth

(some + some -)

Cash cows

Dogs

Hold share/ harvest

Use to invest in other units

Withdraw Harvest Share

Low

Cash generators

Cash in Balance
(some + some -)

High

Low

Relative market share (log scale) Hints and Pitfalls

Strategic movements Cash movements

THIS IS A PARTIAL PREVIEW  Do: Validate your market definition with your client: You can critical in measuringfull relative market share and industry growth rate. preview the both PowerPoint document and It is download it at http://learnppt.com/powerpoint/  Dont: Use as the only generic modeluse in conjunction with other analytics (e.g. scenario modelling)
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END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

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