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This technique is particularly useful for multi-divisional or multiproduct companies. The divisions or products compromise the organisations “business portfolio”. The composition of the portfolio can be critical to the growth and success of the company. The BCG matrix considers two variables, namely.. N MARKET GROWTH RATE N RELATIVE MARKET SHARE The market growth rate is shown on the vertical (y) axis and is expressed as a %. The range is set somewhat arbitrarily. The overhead shows a range of 0 to 20% with division between low and high growth at 10% (the original work by B Headley “Strategy and the business portfolio”, Long Range Planning, Feb 1977 used these criteria). Inflation and/or Gross …ver más…
These describe businesses that have low market shares in slow growth markets. They may well have been Cash Cows. Often they enjoy misguided loyalty from management although some Dogs can be revitalised. Profitability is, at best, marginal. Strategic options would include.. Retrenchment (if it is believed that it could be revitalised) Liquidation Divestment (if you can find someone to buy!) Successful products may well move from question mark though star to Cash Cow and finally to Dog. Less successful products that never gain market position will move straight from question mark to Dog.
The BCG is simple and useful technique for strategic analysis. It is convenient for multi-product or multi-divisional companies. It focuses on cash flow and is useful for investment and marketing decisions. One should not however, ignore the limitations of the technique. Definition (qualitative and quantitative) of the market is sometimes difficult.
It assumes that market share and profitability are directly related. The use of high and low to form four categories is too simplistic.
Growth rate is only one aspect of industry attractiveness and high growth markets are not always the most profitable. It considers the product or business in relation to the largest player only. It ignores the impact of small competitors whose market share is rising