bcg model& ge--lecture 8

7/30/2019 Bcg Model& Ge--lecture 8

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abhay


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Boston consulting group growth share matrix

Industry growth rate

Firms relative position in the industry


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Some firms may have high market share andsome may have low market share.

For some businesses, industry growth ratemay be attractive while in others the growthrate may be very poor


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The matrix classifies business of a firm into

four distinct categories on the basis ofindustries growth rate and firms relativeposition in the industry


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Stars & question marks appear in high growthindustry

Star is a market leader and question mark is afollower


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Cash cows & dogs appear in low industrygrowth.

A cash cow is a market leader while the dogis a poor follower.


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Stars need good investment support since itoperates in a high growth market.

Stars normally does not bring in immediateprofits but holds out great potential for thefuture.


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Question marks

unlike stars their future isuncertain.

In addition they are in high risk categorywhile stars are in the medium risk category.


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Cash cows-- net generator of resources.Bring lot of cash to the company

Brings higher profits. Do not need heavyinvestments.

Industry growth is low so expansion

possibility or need of investment is minimal.


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Dogs

Low industry growth and low MS. .--cash traps

One or two businesses of company are stars,one or two may be cash cows, few may bequestion marks and few may be dogs.


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The company has to decide what to do witheach business. when the firm completes thisexercise, the cards are clearly laid out.


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1) what to do with question marks?

2)can few of them turn to stars tomorrowwith the support of right investment &

promotion?

3)What can be done to strengthen stars? 4)is the time ripe to totally milk any of the

cash cow ? 5) which of the dogs should be sold out

immediately?


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Wokhardt- BCG matrix Stars-bulk drug business & export business

Cash cows

domestic formulation business

Question marksanimal health, diagnostics

Dogs

neutraceuticals, hospital division


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Any company can appropriately rate itsdifferent businesses for the purpose ofstrategic planning on the basis of twoparameters

industry attractiveness & company's businessstrength


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How attractive is the industry?

How strong is the firm in the industry?

The firms would like to operate in the mostattractive industries and excel through itsdistinct strength.


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Basic approach of GE model When the industry is highly attractive and the

company has the best of strength forexcelling in that industry, the business israted as the most important one for thecompany. When the industry concerned isleast attractive and the company's strength inexcelling in that industry is very low, thebusiness is rated as the least important one.


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industry attractiveness

1) Industry potential

2)industries current size

3)industry growth

4)industries structure

5)industry profitability


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company's business strength

1) current market share

2)growth rate

3)differentiation strength

4)Brand image

5)corporate image


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Divided into nine cells The upper left zone represent businesses that

are most important to the company

The lower right zone represents businessesthat are least important to the company


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The central diagonal zone representsbusinesses that are medium in theirimportance.

Using the ratings in the matrix, the firm canappropriately set its objectives and strategies

in respect of each of its business.

bcg model& ge--lecture 8

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