BCG Growth Share Matrix :: essays research papers

Dublin Institute of TechnologyMSc COMPUTING SCIENCE(Information Technology for Strategic Management)BCG Growth Share MatrixResearch Assignment no 2The BCG Growth-Share MatrixThe BCG Growth-Share Matrix is a portfolio planning model that was developed by Bruce Henderson of the Boston Consulting Group in the early 1970s. It is based on the observation that organisations business social units can be classified into four categories based on combinations of grocery growth and foodstuff division relative to the largest competitor. Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions indoors these two important determinants of profitability.Growth Share Matrix (http//www.netmba.com/strategy/matrix/bcg/)This framework assumes that an increase in relative market share will resolving power in an increase in the generation of specie. This assumpt ion often is true because of the experience curve increased relative market share implies that the firm is paltry forward on the experience curve relative to its competitors, thus developing a cost advantage. A second assumption is that a growing market requires investment in assets to increase capacity and therefore results in the consumption of cash. Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption.Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firms other business units that were at a more mature stage and generating significant cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born.The four categories areoDogs. Dogs have low market share and a low growth rate and thus neithe r generate nor call for a large amount of cash. However, dogs are cash traps because of the money tie up in a business that has little potential. Such businesses are candidates for divestiture.oQuestion marks. Question marks are growing rapidly and consume large amounts of cash, but because they have low market shares they do not generate much cash. 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 fit the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines.