It classifies business portfolio into four categories based on industry attractiveness growth rate of that industry and competitive position relative market share. The boston consulting group matrix bcg matrix, also referred to as the product portfolio matrix, is a business planning tool used to evaluate the strategic position of a firms brand portfolio brand equity in marketing, brand equity refers to the value of a brand and is determined by the consumers perception of the brand. However, owning a product portfolio poses a problem for a business. Cash cows are the most profitable products in the portfolio. In 1968, bcg founder bruce henderson noted that four rules are responsible for product. The bcg matrix or boston matrix was developed by the boston consulting group in the late 60s as a way for companies to develop strategies for their different product lines. Stars can eventually become cash cows if they sustain their success until a. During the 1970s, the boston consulting group bcg 1973. Cash cows are the most profitable brands and should be milked to provide as much cash as possible. It is a table, split into four quadrants, each with its own unique symbol that represents a certain degree of profitability.
Bcg matrix was a framework originally devised by boston consulting group to strategically measure the potential growth rate of a company within its industry versus its relative market share. Cash cows as leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate so they generate more cash than they consume. The boston matrix is a popular tool used in marketing and business strategy. The absolute values of the axes are dependent on the line of business or industry. The boston consulting group matrix provides the recommendations for the development of. The boston consulting groups strategy institute is taking a fresh look at some of bcgs classic thinking on strategy to explore its relevance to todays business environment. They have ended up in the socalled maturity stage of the product lifecycle.
The return of the cash cow boston consulting group. Oct 14, 2019 a perfect example to demonstrate bcg matrix could be the bcg matrix of pepsico. Limitations of the bcg matrix the marketing study guide. Apr 23, 2019 a cash cow is a product that produces steady milk profit long after the initial cost of investment has been recovered. The bcg matrix is a matrix designed by the boston consulting group back in 1970s. The m atrix is established in 1970 by bruce d oolin henderson 1915 1992 for the bcg in boston.
Cash cow a company that pays out most of its earnings per share to stockholders as dividends. It is considered as the oldest and perhaps most renowned of all the matrices. Therefore, stars even tually become cash cows if they hold their market. The boston consulting groups growth share matrix dogs stars question marks cash cow 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0 10x 4x 2x 1. As the market matures and the products remain successful, stars will migrate to become cash cows. Under the growth share matrix model, a business can either become a cash cow if it becomes a market leader in the industry or a dog, which represents a low market share and a low growth. The boston consulting group bcg is a renowned organization. Products are categorized into one of four categories. Also known as the boston box or grid, bcg charts are divided into four types of scenarios, stars, cash cows, dogs and question marks. The bcg matrix is an assessment model in which products or functional business units are assessed on two features. A completed matrix can be used to assess the strenght of your organisation and its product portfolio. This technique became a staple of market strategies in the 1980s. The boston consulting group bcg growthshare matrix is a. Bcg matrix of samsung bcg matrix analysis of samsung.
A cash cow is a metaphor used for a business or a product. In this article, we analyze products, but the bcg matrix can also be used to evaluate individual business units called strategic business units sbus or any other cashgenerating assets, such as property. Cash cows require little investment and generate cash that can. May, 2018 bcg matrix is the term used in the context of management. It is referred to an asset or a business, which once paid off, will continue giving consistent cash flows throughout its life. Boston consulting group matrix professional academy.
There are four assumptions that underpin the boston consulting group matrix. A cash cow is a term used in the boston consulting group bcg matrix. One of the more obvious benefits of the bcg matrix is its level of simplicity in that it only has two dimensions and four quadrants and its easy ability to recall continue reading limitations of the bcg matrix. Although the concepts of cash cows, dogs, question marks and stars may described are used more widely in large business they may be applied to business of all sizes. Bcg matrix explained smi strategic management insight. Cash surpluses will be generated when the product is in the maturity stage of the life cycle.
Greenspans statement and hark back to what we wrote in 1970it is an appropriate time to highlight once again the important role of the cash cow. Definition qualitative and quantitative of the market is. An analysis on bcg growth sharing matrix munich personal. These are successful products that enjoy a large market share in a wellestablished market. A business with a range of products has a portfolio of products. Cash cow is one of the four categories under the boston consulting groups growth matrix that represents a division which has a big market share in a lowgrowth industry or a sector. Jan 16, 2020 the boston consulting group bcg growthshare matrix is a planning tool that uses graphical representations of a companys products and services in an effort to help the company decide what it.
This business method bases its theory on the life cycle of products. This is also known as the growth market share matrix. Although the bcg matrix is widely used and widely discussed in many strategy and marketing textbooks, it does carry significant practical limitations. Boston matrix product portfolio model business tutor2u. One of the firms most famous analytical frameworks includes the bcg matrix, also known as the bcg growth share matrix. According to this technique, businesses or products are classified as low or high performers depending. The boston matrix is a model which helps businesses analyse their portfolio of businesses and brands. The bcg matrix is based on the classification of sbus into question marks, stars cash. Pengertian analisis matriks bcg dan contohnya ilmu. Cash cow in growth share matrices, the quadrant representing companies, especially subsidies, that produce large profits with little need for cash injection. This is why the axes are often indicated with high and low.
Market share gains will always generate cash surpluses. Or, a company or division of a company that generates a steady and significant amount of free cash flow. So the cash being spent and brought in approximately nets out. How to use the bcg matrix smart insights digital marketing. The simple rule here is to milk these products as much as possible without killing the cow.
The bcg matrix is a business method that was created by the boston consulting group in the 1970s. Pdf an analysis on bcg growth sharing matrix researchgate. Bcg matrix also known as the growthshare matrix is used by organizations to classify their business units or products into 4 different categories. A product that can be classified as a cash cow in the bcg matrix generally has a high market share, a reasonable margin, and limited growth or a slight decrease. The bcg matrix, also known as the boston growthshare matrix, is a tool to assess a companys current product portfolio. Bcg matrix is the term used in the context of management. For example, you can push a question mark into a star and, finally, a cash cow. The boston matrix assumes that by the time a product dominates a mature market it will have recouped its initial investment several times over and that its marketing expenditure will be relatively low. These are the product that are the market leader, and bring more of the revenue in the company, as compare to the cash they consume. Organisations would ideally like to have a good mix of cash cows and stars. These have more market share as compare to market growth. The growthshare matrix aka the product portfolio matrix, boston box, bcgmatrix, boston matrix, boston consulting group analysis, portfolio diagram is a chart that was created by bruce d. The boston consulting group bcg matrix is a simple corporate planning tool, to assess a companys position in terms of its product range the purpose of the bcg matrix or growthshare matrix is to enable companies to ensure longterm revenues by balancing products requiring investment with products that should be managed for remaining profits. Henderson for the boston consulting group in 1970 to help corporations to analyze their business units, that is, their product lines.
High market growth rate means higher earnings and sometimes profits but it also. As a result, the business program, a recent onetime cash cow is. The stars are said to, generate large amounts of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate, according to. Since 1968, the bcg matrix, also known as the boston or growthshare matrix, is a tool to answer those questions by providing. It is focused on the cash flows generated by products and businesses portfolios as a result of relative market share and growth. A business becomes a cash cow or a dog depending on its performance in the growth stage. This jargon has long been used in the boston consulting group bcg matrix a simple tool that helps companies decide which products they should keep, which they should let go, and which they should invest in further. Cash cows cash cows are leaders in a more mature market. The boston matrix use a sentence to describe each of the 4 categories of the boston matrix. The bcg matrix or boston growth matrix is actually a box that basically helps you visualize see and organize business services and products based on a very simple box method. The growth share matrix is a diagram of the normal relationship of. Bcg cash cows guide to the bcg growthshare matrix and analysis. The bcg matrix was created for the boston consulting group by bruce henderson in 1968.
The company has perfected its product mix over the years according to whats working and whats not. Bcg matrix boston matrix strategy training from epm. The boston consulting group bcg helps the business organizations to. May 01, 20 bcg matrix is a framework created by boston consulting group to evaluate the strategic position of the business brand portfolio and its potential. If a star can maintain its large market share it will become a cash cow when the market growth rate declines. Concepts and applications by kingsley amah 1 published by. The boston consulting group matrix provides the recommendations for the development of strategic. Understanding cash flow is key to making the most of the bcg matrix.
Since a cash cow demonstrates a return on assets greater than the market growth rate, it generates more cash than it consumes. This helps the company allocate resources and is used as an analytical. Pengertian analisis matriks bcg dan contohnya matriks bcg atau bcg matrix adalah alat analisis bisnis yang digunakan untuk membantu perusahaan dalam mempertimbangkan peluang pertumbuhan dengan perencanaan strategis jangka panjang dan meninjau portofolio produk perusahaan tersebut agar dapat mengambil keputusan untuk berinvestasi, mengembangkan atau menghentikan produknya. The return of the cash cow 2 today, as we reflect on mr. It is based on the observation that a companys business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the. The next part of the bcg matrix for coca cola deals with stars.
Cash cow star problem child dog use p240242 to help you 14. Using the boston consulting group portfolio matrix to. Boston consulting group is renowned as a thought leader in the management consulting world. The bcg model in marketing is a matrix developed by the boston consulting group to assess a companys portfolio of products.
Bcg matrix has four types of scenarios with respect to the market share of the company, cash flow generation and growth rate of the industry in which company is operating. Stars, cash cows, question marks and dogs, detailed characteristic of each group. Growth rate of an industry and the market share of a respective business relative to the largest competitor present in the industry are taken as the basis. This provide cash for turning the question mark in cash cow products. This article, the fourth in the series, examines the growth share matrix, a portfolio management tool developed by bcg founder bruce henderson. Many businesses attempt to create or acquire such ventures, since they can be used to boost a companys overall income and to support less profitable endeavors. It divides a market on the basis of its relative growth rate and market share and comes up with 4 quadrants cash cow, stars, question marks and dogs. The growth share matrix or product portfolio boston.
Oct 11, 2016 the application of boston consulting group matrix on tesco would help in analyzing the profitability and future prospects of the different businesses being managed under the label of tesco. The cash cows in the bcg matrix are the products that have been on the market for some time. Cash cow is one of the four categories quadrants in the bcg growthshare matrix that represent the division within a company that has a large market share within a mature industry. Bcg matrix is a framework created by boston consulting group to evaluate the strategic position of the business brand portfolio and its potential. The boston consulting group bcg helps the business.
A cash cow is a product that produces steady milk profit long after the initial cost of investment has been recovered. The bcg matrix is a corporate planning tool that identifies four types of portfolio units. Therefore, the boston consulting group designed product portfolio matrix bcg matrix or growthshare matrix to help business with longterm strategic planning. The boston consulting group bcg growthshare matrix is a planning tool that uses graphical representations of a companys products and services in. The bcg matrix, developed by the boston consulting group, a leading management consulting firm, is the best known of these methods. Cash cow a business unit that has a large market share in a mature, slow growing industry. Bcg matrix case interview framework management consulted. Products in low growth markets with high market share. Using the boston consulting group portfolio matrix to analyze. This implies that diverting funds to other growth areas will not have adverse implications for the cash cow. Mars inc why do mars inc sell so many brands and products. This is also known as the growth market share matrix by plotting these factors it is possible to identify which products or brandsunits a company should invest further in, and which products it. First, the relative market share that a certain product or its business unit has with respect to the competition. It is a matrix which helps in decision making and investments.
The boston matrix makes a series of key assumptions. Stars of today may become the cash cows of the future. In this article, we analyze products, but the bcg matrix can also be used to evaluate individual business units called strategic business units sbus or any other cash generating assets, such as property. A model developed by the consultancy of the same name in the 1970s. In the boston matrix products are classified according to. Market share is measured relative to the products largest competitor. A business becomes a cash cow or a dog depending on its performance in the growth. Scribbled icons and square ribbon, representing 4 groups. The bcg growthshare matrix is a portfolio planning model developed by bruce henderson of the boston consulting group in the early 1970s.
A bcg matrix helps organizations determine which areas of their. The cola beverage industry serves a good example here. Resources are allocated to business units according to where they are situated on the grid as follows. Or, a company or division of a company that generates a steady and significant. Here are the four quadrants of pepsicos growthshare matrix. Based on this assessment, the boston matrix helps in the longterm strategic planning of the companys portfolio, as it indicates where to invest, to discontinue or develop products. Cash cows are assumed to enjoy lower cost, economies of scale, and high profit margins. Defining the market is one of the most important things to do in this analysis.
A perfect example to demonstrate bcg matrix could be the bcg matrix of pepsico. Excess cash is provided by the cash cows that are entering a period of low growth in mature markets but which need relatively little cash investment. Market share can be gained by investment in marketing. Cash cows predicts that the products are in low growth markets, and market share is. Jan 20, 20 the bcg matrix is also known as the boston matrix, the growth share matrix or boston consulting group matrix. Stars are a companys prized possession and are topofmind in a firms product portfolio. Bcg matrix definition and examples presentation infographics. Products in the cash cows quadrant are in a market that is growing slowly and of which the products have a high market share.
The growth share matrix is, put simply, a portfolio management framework that helps companies decide how to prioritize their different businesses. The bcg matrix explained how does the bcg matrix work. For example, company a may have a 5 percent market share, and the. Full form of bcg matrix is boston consulting group matrix. Copying and distribution of this pdf is prohibited without written permission. The bcg matrix for tesco is given in the following section. Draw a box and then draw two lines, one horizontally across the middle, and one vertically straight down. Introduction boston consulting group bcg matrix is developed by bruce henderson of the boston consulting group in the early 1970s. Cash cow, in business jargon, is a venture that generates a steady return of profits that far exceed the outlay of cash required to acquire or start it.
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