The BCG Matrix
The BCG matrix (also known as the Boston Consulting Group
Matrix) is a tool developed by the Boston Consulting Group that helps
businesses analyze their products based on two variables- relative market share
and relative market growth. It helps businesses discern where to invest and
where to divest their money on the basis of the product’s performance with
relation to the market.
The matrix comprises of four quadrants within which units of
the business are divided. These are labeled Star, Cash Cow, Question Mark and
Dog.
Stars: These are business units with a very
high market share and also belong to a high-growing industry. They may even be
market leaders. Not only do these earn the most revenue for the companies, they
also require more investment to compete with the other brands in that market.
Cash Cows: These units have relatively larger market shares
but the market growth rate tends to be lower. The products might still earn
high revenues but these too may stagnate over time. Hence, investments from
cash cow businesses can be used to promote growth of other units that operate
in faster growing markets.
Question Mark: Businesses that operate on low market share
in a fast-growing industry are generally put into this category. They have potential to gain revenue and
become Star units for the company. Hence, they require sizeable investments.
However, if not managed well, these units may actually lose market value and
come to fit into the ‘Dog’ category.
Dogs: Units with low market shares operating in a declining
market are generally referred to as the Dogs. They generate barely enough cash
and industry they operate in has little to no scope for growth. Hence,
companies tend to divest money from these units.
Category 1: Nestle
Star: Nescafe Coffee
This product has a very high market share in a high growing market. The coffee brand holds 56% share in the market and has emerged as a world leader.
This product has a very high market share in a high growing market. The coffee brand holds 56% share in the market and has emerged as a world leader.
Question Mark: Nestle Chocolates
Nestlé’s share in the global chocolate industry has declined
over time and is somewhere around 10% globally. With too many competitors
dominating the market, Nestle has been unable to hold a large market share.
However, the chocolate industry is a growing one. Significant investment might
be able to boost sales for the company’s chocolate products.
Cash Cow: Maggi
Maggi is a product that generates high revenue for Nestle. It has retained 60% of the market share despite having gone through a massive crisis and they are almost back to their pre-crisis levels. However, it requires lesser investments with each day to maintain its position as it does not have major competition to fight off.
Maggi is a product that generates high revenue for Nestle. It has retained 60% of the market share despite having gone through a massive crisis and they are almost back to their pre-crisis levels. However, it requires lesser investments with each day to maintain its position as it does not have major competition to fight off.
Dog: Milo
The product, when launched, had immense potential, however,
slow market growth led to a decline in sales for Nestle’s Milo. The product
belongs to this category since it doesn’t require investments as the scope for
growth is extremely limited especially considering the dominance by other
brands in the market.
Category 2: ITC
Star: ITC Hotels
ITC’s hotels belong to the Star category for the company since
they earn high revenues in a fast-growing but also intensely competitive
industry. They constantly invest more and more to keep the hotel business
booming.
Question Mark: FMCG and Personal Care
The likes of Ayurvedic products and huge FMCG companies have
made it difficult for ITC to obtain a sizeable market share. However, more
investment in R&D can lead to ITC gaining a stronger position in this
market which has immense opportunity for growth and expansion.
Cash Cow: Cigarettes
ITC has nearly 76% market share in cigarettes which is
market that has low growth as opposed to others. Hence, the company does not
require too much investment to maintain its stature.
Dog: ITC Infotech
Unable to cope with the likes of Infosys, Cognizant and HCL,
this global IT service unit by ITC has found it tough to survive in a difficult
market. This unit is hence placed in the Dog category owing to its lower scope
of growth in a slower market.
Category 3: PepsiCo
Star: Pepsi, Aquafina, Tropicana
The three are some of PepsiCo’s star products even though
they don’t dominate the market. Aquafina has a market share of 15%, second only
to Bisleri, and Tropicana has a market share of nearly 30%, second to Real,
which do make them stiff competitors in a high growth industry.
While Pepsi has been taking a hit by competitors like
Coca-Cola, there is still scope for improvement by the brand.
Question Mark: Quaker
Quaker by PepsiCo occupies a 13.3% market share in packaged
breakfast food in India while Kellogg’s has a 37% share. The market has
potential for growth even though Quakers market share is still not the highest
in this category.
Cash Cow: Lay’s
Frito Lays is the cash cow for PepsiCo. It enjoys 50% of the
market share in this industry in India and 30% in the US. Balaji Wafers comes
second with 18% of the market share. Hence, the dominance in this relatively
slow growth industry is apparent and hence, Lay’s is good source of revenue for
the company that requires limited investments.
Category 4: Amul
Star: Amul Ghee
This is certainly a star product for Amul. It earns the best
revenue for the company and has potential for future growth as well, especially
due to new entrants like Patanjali. Amul, however, is still a learding player
with 30% of the market share while Patanjali has a 10% share.
Question Mark: Amul Lassi
Amul Lassi was conceived with the idea of occupying a major
stake in a growing market due to the increased demand for healthy alternatives
to soft drinks by consumers. However, the product is yet to make its mark.
Significant investments can perhaps change the future of this particular
product by Amul.
Cash Cow: Amul Milk and Amul Butter
Undoubtedly, milk is a very high revenue-earning asset for
Amul as is butter. Infact, even globally, Amul is the 6th largest
butter brand in the world. Its pouch milk was the highest turnover product in
2017-18. Hence, in a relatively slower market, Amul dominates in terms of
market share for milk and dairy products.
Dog: Amul Pizza, cookies and chocolate
These can be considered as Dog products for Amul since not
only do they have low market shares but they heavy competition and limited
advancements allow for minimal growth as well. This makes investment in these
products quite futile for Amul.
Category 5: Hindustan
Unilever Limited
Star: Surf Excel and other Detergent Brands
The detergents by HUL sell the most and hence, in this
ever-growing industry, the company occupies an almost 40% market share. They
generate immense revenue for the company.
Question Mark: Domex
Domex is one such product which has a low market share in
the category of toilet-cleaning products in India. However, since the growth of
this market is not quite bad, there is scope for further improvement for Domex
if more investments are made by HUL.
Cash Cow: Clinic Plus and other hair care
HUL controls nearly half of the market for hair care products
and people tend to swear by brands like Clinic Plus and Sunsilk. Hence, the
investment for these units is ample especially given the moderate growth rate
of the industry.
Dog: Brooke Bond Sehatmand
The healthy tea industry boomed for quite some time but has
now come to quite a standstill owing to high levels of competition and lower
scope for innovation. Hence, this particular launch by HUL, which cannot beat
the likes of Tetley where green tea is considered, and the capital invested might
be utilized elsewhere.
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