The parameters of the bkg matrix are. Boston Advisory Group (BCG) Matrix

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Posted on http://www.allbest.ru/

Boston matrix assortment portfolio

Introduction

2.2 Analysis of the main economic indicators of the enterprise LLC "Empire Bags"

2.3 Conducting a strategic analysis of the brands of Empire Bags LLC using the matrix method of the Boston Advisory Group

Conclusion

Introduction

The efficiency of organizations, companies, holdings, and the national economy as a whole largely depends on the study of the management systems being created, their rational construction and the investments required. The need for investment when creating modern management systems is always great, and the available investment resources are always limited. In this regard, in practice, the management of organizations is always faced with the task of choosing the most effective option for implementing investments in management systems.

Currently, there are many methods for studying control systems.

Developing, analyzing and managing a portfolio strategy is a long-term process that requires a complete understanding of market trends and the company's internal processes. Portfolio analysis examines a product's competitiveness, product strengths and weaknesses, market dynamics, changes in consumer behavior, and a variety of other factors that influence the long-term attractiveness of an industry.

Portfolio strategies provide the most efficient way to allocate a company's limited resources to support and develop a diverse product portfolio.

In global practice, the following assortment analysis models are used to approve a portfolio strategy: the Boston Advisory Group matrix and the GE / McKinsey matrix.

The BCG matrix helps answer the question “Investments in the development of which goods and services will be most profitable?” and develop long-term development strategies for each product range.

The GE/McKinsey matrix helps to select the most stable product segment for a business, taking into account the competitiveness of the company's product and the potential of the target market.

This paper will examine the Boston Advisory Group matrix method.

The relevance of using the Boston Advisory Group matrix method lies in the fact that this method will allow you to find ways to solve the problem and develop a strategy to improve the company’s performance.

To ensure an optimal and stable level of income generation, company management needs to periodically conduct a strategic analysis of the company’s product portfolio.

At the present stage of the market economy and with the rapid emergence and development of new markets, the level of competition increases, which, in turn, makes the company's management think about its position in the market. The consumer also keeps up with the times and quickly masters emerging innovations in a particular area. And in this regard, a developing company needs to look for new ways of development, invest free funds in the creation of new goods and services in order to maintain or improve its position in the market.

The purpose of this work is to study the theoretical aspects of the matrix method of the Boston Advisory Group in the ISU, analyze the activities and develop recommendations for improving the product portfolio of the company Empire Bags LLC.

Based on the set goal, the following tasks were completed:

Studying the theoretical aspects of the matrix method

Boston Advisory Group to ISU

Conducting an analysis of the main economic indicators of the activity of the company "Empire Bags" LLC, and also carried out a strategic analysis of the brands of "Empire Bags" LLC using the matrix method of the Boston Advisory Group.

The object of this study is LLC "Empire Bags".

The subject of the study is the matrix method of the Boston Advisory Group in MIS.

The information base of the study includes publications by domestic authors and the results of calculations during the study.

Chapter 1. Theoretical aspects of the matrix method of the Boston Advisory Group in MIS

1.1 Essence and main indicators of the BCG matrix

Currently, one of the widely used tools for assessing the economic activity of an organization is portfolio analysis.

An enterprise's portfolio is a collection of relatively independent business units (strategic business units) belonging to one owner.

Portfolio analysis is a tool with which enterprise management studies and evaluates its business activities in order to invest funds in the most profitable or promising areas and reduce/terminate investments in ineffective projects.

At the same time, the relative attractiveness of markets and the competitiveness of the enterprise in each of these markets is assessed. The company's portfolio is supposed to be balanced, that is, there must be the right mix of divisions or products that need capital for growth with business units that have some excess capital.

The purpose of portfolio analysis techniques is to help managers create a clear picture of the cost and profit patterns of a diversified company. Portfolio analysis provides managers with a tool for analyzing and planning portfolio strategies to determine reasonable diversification of a diversified firm's activities.

One of the most important uses of the results of portfolio analysis is making decisions about restructuring the company in order to take advantage of emerging opportunities both within the company and outside it.

Portfolio analysis is designed to solve the following problems:

Coordination of business strategies, or strategies of business units of the enterprise. It is designed to ensure a balance between business units with quick returns and areas that prepare the future;

Distribution of human and financial resources between business units;

Portfolio balance analysis;

Establishment of executive tasks;

Carrying out enterprise restructuring (merger, acquisition, liquidation and other actions to change the management structure of the enterprise, expand or reduce business).

One of the tools for conducting strategic analysis and planning in marketing is the BCG matrix. The BCG Matrix was created by the founder of the Boston Consulting Group (Boston Consulting Group - a leading international company specializing in management consulting) Bruce D. Henderson to analyze the relevance of the company's products, based on their position in the market relative to the growth of the market for these products and the share occupied by the company selected for analysis On the market. The BCG matrix (also called the growth-market share matrix) was developed in the late 1960s and is one of the first portfolio analysis models.

The BCG matrix is ​​based on two hypotheses: the leading company in the segment has a competitive advantage in production costs, and therefore the highest level of profitability in the market; in order to operate effectively in fast-growing segments, the company must invest in product development at a high level; conversely, presence in a market with low growth rates allows you to reduce costs for product development.

The BCG Matrix suggests that to achieve productive, profitable long-term growth, a company must generate and extract cash from successful businesses in mature markets and invest it in high-growth, attractive new segments, strengthening the position of its products and services in them to generate sustainable levels of income in the future.

Rice. 1. Example of a BCG table

Thus, the main objective of the BCG model is to determine priorities in the development of the company’s product range and identify key areas for future investments. The method helps answer the question “Investments in the development of which goods and services will be most profitable?” and develop long-term development strategies for each product range.

The following products can be analyzed in the BCG model:

· separate areas of the company's business that are not related to each other.

· separate groups of goods sold by an enterprise in one market.

· individual units of goods and services within one group of goods.

The construction of the BCG matrix begins with the calculation of three indicators for each product group included in the model: the relative market share of the company's product, the market growth rate and the sales/profit volume of the analyzed product groups.

The calculation of relative market share is calculated by dividing the absolute market share of the company's product in the analyzed segment by the market share of the leading competitor in the analyzed segment. The relative market share is plotted along the horizontal axis of the matrix and is an indicator of the competitiveness of the company's product in the industry.

If the value of the relative market share of a company's product is greater than one, then the company's product has a strong position in the market and has a high relative market share. If the value of the relative market share is less than one, then the company’s product has a weaker position in the market compared to its leading competitor and its relative share is considered low.

The calculation of market growth rates is plotted along the vertical axis of the BCG matrix and is an indicator of the maturity, saturation and attractiveness of the market in which the company sells its goods or services. It is calculated as a weighted average of all market segments in which the company operates.

If the market growth rate is more than 10%, the market is fast-growing or a market with a high growth rate. If the market growth rate is less than 10%, it is a slow-growing market or a market with a low growth rate.

Sales volume is shown in the matrix through the size of the circle. The larger the size, the higher the sales volume. The information is collected on the basis of the company’s existing internal statistics and clearly represents in which markets the company’s main funds are concentrated (Fig. 2).

Rice. 2. An example of filling out the BCG matrix of an enterprise

1.2 Interpretation and analysis of the BCG matrix

As a result of constructing the BCG matrix, all product groups or individual products of the company are divided into 4 quadrants. The development strategy of a product group depends on which quadrant the product is located in. Each quadrant has separate recommendations (Fig. 3):

Rice. 3. Description of the four quadrants of the BCG matrix

First quadrant: “question marks” or “difficult children”

In the first quadrant of the BCG matrix there are such areas of the company's business that are represented in fast-growing industries or segments, but have a low market share or, in other words, occupy a weak position in the market. Such activities require a high level of investment in order to grow in line with the market and strengthen the position of the product in the market.

When a business line falls into this quadrant of the BCG matrix, the enterprise must decide whether there are now sufficient resources to develop the product in this market (in this case: investments are directed to the development of knowledge and key advantages of the product, to an intensive increase in market share). If a company does not have sufficient resources to develop a product in these markets, the product does not develop.

Second quadrant: "stars"

The second quadrant of the BCG matrix contains the company's business areas that are leaders in their rapidly growing industry. The company must support and strengthen this type of business, and therefore not reduce, but possibly increase investments.

Some of the company's best resources (personnel, scientific developments, funds) should be allocated to these areas of business. This type of business is a future stable supplier of funds for the company.

Third quadrant: cash cows

Represents lines of business with a high relative market share in slow-growing or even stagnant markets. The company's products and services presented in this quadrant of the BCG matrix are the main generators of profits and cash.

These products do not require high investments, only to maintain the current level of sales. The company can use the cash flow from the sale of such goods and services to develop its more promising lines of business - "stars" or "question marks".

Fourth quadrant: "dogs"

This quadrant of the BCG matrix concentrates business areas with a low relative market share in slow-growing or stagnant markets. These lines of business usually bring little profit and are unpromising for the company. Strategy for working with these goods: reduction of all investments, possible closure of the business or its sale.

1.3 Formation of an ideal portfolio according to the BCG model and development of strategic decisions when analyzing the matrix

An ideal portfolio should consist of 2 groups of goods:

· goods that can provide the company with free cash resources for the possibility of investing in business development (stars and cash cows).

· goods that are at the stage of introduction to the market and at the stage of growth, in need of investment and capable of ensuring the future stability and sustainability of the company (question marks).

In other words, goods of the first group ensure the current existence of the company, goods of the second group ensure the future income of the company.

Decisions to be made during analysis:

1. For each product in the BCG matrix, a development strategy must be adopted. The correct strategy helps to determine the position of goods within the matrix:

· for the "stars" - maintaining leadership

· for “dogs” – leaving the market or decreasing activity

· for “question marks” - investment or selective development

· for "cash cows" - obtaining maximum profit

2. Products included in the “dogs” group must be excluded from the portfolio as quickly as possible. This group is dragging the company down, depriving it of free cash, and eating up resources. An alternative to exclusion from the portfolio may be to update and reposition the product.

3. If there is a lack of current available funds, programs should be developed to increase the number of “cash cows” or “stars” in the long term, and in the short term the production of new products should be reduced (since the company is not able to support the development of all new products at the required level)

4. If there is a lack of future funds, it is necessary to introduce into the portfolio a larger number of new products that can become “stars” or “cash cows” in the future.

Ideally, a balanced product portfolio of an enterprise should include 2-3 products - "Cows", 1-2 - "Stars", several "Problem Children" as a foundation for the future, and, possibly, a small number of products - "Dogs". An excess of aging goods (“Dogs”) indicates the danger of a recession, even if the current performance of the company is relatively good. An excess of new products can lead to financial difficulties.

· T The pace of market growth cannot indicate the attractiveness of the industry as a whole. There are many factors influencing the attractiveness of a segment - entry barriers, macro and micro economic factors. The market growth rate does not indicate how long-term the trend will be.

Chapter 2. Practical aspects of the Boston Advisory Group matrix method in MIS

2.1 Characteristics of the enterprise LLC "Empire Bags"

The all-Russian chain of stores "Empire of Bags" is the largest retail chain of large specialized stores in Russia, engaged in the sale of bags. The network is part of the JULY group of companies. Since 1994, "JULY" has been engaged in the trade and production of bags. The group owns three of its own production facilities in Russia (in St. Petersburg, Samara and Voronezh). They produce a wide range of goods under the trademarks "Mr.Bag", "Navigator", "Passo Avanti". At the same time, the network works with the best Russian and foreign manufacturers.

The company operates in 86 cities of Russia. The chain consists of 230 stores. The chain of stores was built using a franchising system. Each franchise owner has the right to use the trademark "Empire of Bags", special conditions for the supply of goods, exclusive rights to a certain territory (city, region, region). Five stores operate in Ufa (store addresses: Oktyabrya Ave., 113; 2 Hypermarket "O" KEY, Marshala Zhukov St., 37; 3 Shopping and entertainment center "June", Komsomolskaya St., 112; TC "Central" Tsyurupy St. , 97; 5 Oktyabrya Ave., 11).

The range of the chain includes women's, men's, children's, travel, sports, youth bags, children's and youth backpacks, business bags, folders, cases and briefcases, bags on wheels, suitcases, trolleys, bags for video cameras, beach and shopping bags, wallets and belt bags, school bags and backpacks. The product range consists of more than 10,000 items.

The company sells the following brands: Francesco Molinary, Poshete, Marzia, Grott, Ecotope, Rain Berry, Mr.Bag, Navigator, Passo Avanti, Eminent, Ecotope, Rain Berry, Bolinni, David Jones, Gianni Conti, Giorgio Ferretti, Sergio Belotti, Tri slona, ​​Unicorn, Valentino Rudy, Wanlima, Askent.

The range includes products made from genuine leather, leatherette, as well as a wide range of synthetic fabrics. The JULY group itself imports raw materials for its products. All products offered for sale online comply with current quality and health safety standards.

2.2 Analysis of the main economic indicators of the enterprise LLC "Empire of Bags"

Table 1 Main economic indicators of Empire Bags LLC, thousand rubles.

Based on the data given in Table 1, you can see that 2011 turned out to be a profitable year for the store, since the store operated at a loss in 2012 and 2013. Net profit also decreased compared to 2011, although revenue in 2013 was higher. This problem is caused by the fact that the store has an increasing debt to suppliers. The formation of debt can be explained by a decrease in sales volumes due to inflated prices for leather and leatherette products and rising inflation rates. To stimulate sales, the company regularly holds promotions to reduce prices by up to 30, 40 and 70% for certain brands or certain product groups.

The company should have more carefully studied consumer preferences and taken into account all kinds of wishes regarding the assortment, supporting the most popular brands in the company's portfolio.

2.3 Conducting a strategic analysis of the brands of Bag Empire LLC using the matrix method of the Boston Advisory Group

Using the method under consideration, portfolio analysis according to the BCG model, it is possible to optimize the assortment portfolio of the company "Empire Bags" LLC, which will help increase the store's sales volume and ensure stable profits in the future.

The brands under study are brands whose products are represented by several product groups. These brands are: Francesco Molinary, Poshete, Marzia, Askent, Passo Avanti.

1. Collection of background information

It is necessary to collect data on sales and profit analysis groups into a single table (Table 2):

Table 2 Data on sales volume and profit of the brands under study for 01/01/13-07/01/13, thousand rubles.

2. Calculation of market growth rate

Table 3

According to the data obtained, it can be revealed that for the brands Francesco Molinary, Askent, Passo Avanti the growth rate is low, for the brands Poshete and Passo Avanti it is high.

3. Calculation of the market share of a product

Let's calculate the relative market share of each brand. In accordance with the obtained data, we determine for each brand what the relative market share is - “low” or “high” (Table 4).

Table 4

The data obtained showed that the brands Francesco Molinary, Poshete, Marzia occupy a low market share, and the brands Askent and Passo Avanti occupy a high market share.

4. Construction of the BCG matrix by sales volume

Now, knowing the relative market share of the product and the market growth rate, we can determine for each brand in the company’s portfolio its place in the BCG matrix. Based on the information obtained, we will build a BCG matrix, reflecting in each cell the brand name, sales volume and total sales volume by brand (Fig. 4)

Rice. 4. BCG matrix by sales volume

5. Construction of the BCG matrix by profit volume

Let's build a similar BCG matrix for profit(Fig. 5.)

Rice. 5. BCG matrix by profit volume

6. Analysis, conclusions and strategy development

Having analyzed the resulting BCG matrices by sales volume and profit, we can draw conclusions and determine the development strategy for the portfolio of Empire Bags LLC.

Portfolio balance: satisfactory. It is necessary to develop new promising areas and strengthen the position of new products - difficult children in the market.

The portfolio of Empire Bags LLC has obvious deviations from the ideal portfolio, since it does not contain brands whose products are not “stars”, which in turn could provide high profits for the company.

Conclusion

Control systems research aimed at developing and improving management in accordance with constantly changing external and internal conditions. In the conditions of the dynamism of modern production and social structure, management must be in a state of continuous development, which today cannot be ensured without exploring the ways and possibilities of this development, without choosing alternative directions.

The essence of a portfolio strategy is to answer the following questions: which business area is profitable in the long term, which product groups should be developed, and which areas are best closed, as they are dragging the company down. In other words, portfolio strategies are used in marketing to prioritize the management of several brands or several product groups within one brand or an entire enterprise.

When developing a corporate portfolio strategy, it is necessary to keep in mind the main goal: to assess the potential of each line of business and for each line of business to determine the vector of development of the assortment.

The applied methods for analyzing the activities of an enterprise help to identify a problem that impedes the normal functioning of the enterprise.

Based on the presented economic indicators of Empire Bags LLC, one can see that 2011 turned out to be a profitable year for the store, since the store operated at a loss in 2012 and 2013. Net profit also decreased compared to 2011, although revenue in 2013 was higher. This problem is due to the fact that the store has increasing debt to suppliers. The formation of debt can be explained by a decrease in sales volumes due to inflated prices for leather and leatherette products and rising inflation rates. To stimulate sales, the company regularly holds promotions to reduce prices by up to 30, 40 and 70% for certain brands or certain product groups.

The company should have more carefully studied consumer preferences and taken into account all kinds of wishes regarding the assortment, supporting the most popular brands in the company's portfolio.

The results of the study showed that in the portfolio of the company "Empire Bags" there are no representatives of the most significant quadrant in the BCG matrix - "stars", who would be leaders in sales and would bring high income to the company, which would allow investing in the development and production of new products .

The study revealed that the portfolio balance of Empire Bags LLC is satisfactory. It is necessary to develop new promising areas and strengthen the position of new products - difficult children in the market.

The portfolio balance from an investment point of view is good: the profits from "Passo Avanti" will be able to support "Poshete and Marzia". And the share of “illiquid assortment - Francesco Molinary dogs” in the portfolio is not so large. Investment priority: support for Passo Avanti, development of the Marzia brand, creation of new products. Poshete brand - it is necessary to first increase the profitability of production, otherwise the investment is not worthwhile. Askent brand - minimal support.

The Francesco Molinary brand needs to be updated or repositioned.

For the Passo Avanti brand, programs should be developed to increase production volume in the long term, and in the short term the production of new products should be reduced (since the company is not able to support the development of all new products at the required level).

With a lack of future funds, it is necessary to introduce more new products into the portfolio under the brands Рoshete and Marzia.

The portfolio of Empire Bags LLC has obvious deviations from the ideal portfolio, since it does not contain brands whose products are not “stars”, which in turn could provide high profits for the company.

The BCG matrix has its limitations and disadvantages, and as such they are:

· the market growth rate cannot indicate the attractiveness of the industry as a whole. There are many factors influencing the attractiveness of a segment - entry barriers, macro and micro economic factors. The market growth rate does not indicate how long-term the trend will be.

· the market growth rate does not indicate the profitability of the industry, since with high growth rates and low entry barriers, intense competition and price competition may arise, which will make the industry unpromising for the company.

· relative market share cannot indicate the competitiveness of a product. Relative market share is a result of past efforts and does not guarantee future product leadership.

· the BCG matrix offers the right directions for investment, but does not contain tactical instructions or restrictions in the implementation of the strategy. Investing in product development without clear competitive advantages may not be effective.

List of used literature

1. Ignatieva A.V., Maksimtsov M.M. Research of control systems. Textbook manual for universities. - M.: UNITY-DANA, 2000 - 71 p.

2. Mylnik V.V., Titarenko B.P. Research of control systems. Textbook manual for universities. - E. Academic Avenue, 2003. - 176 p.

3. Official website of the store "Empire of Bags" http://ufa.imperiasumok.ru/?c

4. Article "Introduction to the development of portfolio strategies" - http://powerbranding.ru/marketing-strategy/assortiment/

5. “Goals and stages of portfolio analysis” - http://www.std72.ru/dir/menedzhment/strategicheskij_menedzhment_uchebnoe_posobie_babanova_ju_v/glava_8_portfelnyj_analiz/196-1-0-3368

6. http://ru.wikipedia.org/wiki/Boston_consulting_group

7. http://matrix-sales.ru/articles/61-matritsa-bkg- ideal of the BKG matrix

Posted on Allbest.ru

Similar documents

Analysis of financial indicators of PJSC "NKMZ". Developing ways to minimize costs by choosing the optimal method for calculating costs and setting prices. The influence of the efficiency of use of enterprise resources on its financial stability.

thesis, added 05/14/2015


Characteristics of the chain statement method. Analysis of return on equity using two-factor and three-factor models. Calculation of general indicators of enterprise profitability and their analysis using the method of chain substitutions.

course work, added 05/01/2015


Types of planning and methods of developing a plan. Analysis of the main performance indicators of the enterprise BratskAqua LLC. Profitability and cost-benefit analysis. Ways to improve the management system, sales and marketing policy of this enterprise.

thesis, added 12/08/2011


Conducting a general analysis of the financial condition of the enterprise. Performing factor analysis based on the compiled multiplicative factor model. Assessment of the influence of factors using the method of chain substitutions and the method of absolute differences.

test, added 02/04/2011


The essence, goals and objectives of analyzing the financial condition of an enterprise. Analysis of financial and economic activities and technical and economic indicators using the example of OAO Neftekamskneftekhim. Development of recommendations to improve the functioning of the enterprise.

thesis, added 11/14/2010


Purpose, objectives and information base for business assessment. Analysis of the net asset method and the income capitalization method in assessing the value of a business. Application of the transaction method. Increasing the efficiency of current enterprise management. Making an investment decision.

course work, added 03/26/2013


Assessment of the financial performance of an enterprise using the example of MTS OJSC. Development of measures to improve it. Analysis of key financial indicators. Economic assessment of the effectiveness of the proposed project to improve financial condition.

course work, added 06/06/2014


Areas of activity and general analysis of the financial condition of the enterprise based on the profit and loss statement. Liquidity of the enterprise, its financial condition. Analysis of solvency, financial stability, profitability and business activity.

course work, added 05/15/2012


Analysis of the main indicators of economic activity and financial condition of the enterprise. Basic financial ratios. Assessment of the probability of bankruptcy of an enterprise. Development of directions for improving production and economic activities.

course work, added 08/24/2010


Organizational and legal form of the enterprise. Structural analysis of non-current assets. Analysis of business activity and financial cycle. Financial stability, balance sheet liquidity, profitability. Recommendations for improving the financial condition of the enterprise.

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Similar documents

Characteristics of the Russian radio industry enterprise JSC Concern Vega. Reasons for changing the strategic plan. Analysis of changes in the external environment of the enterprise. Main directions of basic strategies. Development of the idea, mission and goals of the enterprise.

course work, added 03/17/2012


Theoretical foundations for the formation and implementation of an enterprise development strategy. General organizational and economic characteristics of the enterprise; development analysis, assessment of methods for implementing activities. Formation of measures to implement the strategy.

thesis, added 08/13/2014


Financial activities of domestic enterprises in a transition economy. Tools for developing a financial strategy for an enterprise. Investment portfolio of the enterprise. Development of a plan for financing the investment portfolio.

thesis, added 04/14/2003


Positioning in the product market of the organization "First Insurance Company". Consideration of the process of setting long-term goals and objectives. Carrying out the selection of a basic strategy for the development of the enterprise, forecasting the results of the company’s activities.

course work, added 08/09/2010


Theoretical aspects of strategic management. Analysis of the company's business strategy through the use of the BCG matrix and the Ansoff matrix "opportunities by product and market." Ways to reduce costs, increase market share and sales volumes of an enterprise.

course work, added 06/29/2012


Express diagnostics of the results of economic activities of the LLC Promsnabkomplekt enterprise. Determination and selection of an enterprise development strategy. Assessment of the probability of enterprise insolvency. Forecasting the development of an enterprise.

course work, added 06/08/2010


Application of the ProjectExpert system to develop an enterprise development plan and analysis of an investment project. Optimal options for enterprise development strategy from a number of alternatives. Calculation of performance indicators using Monte Carlo analysis.

course work, added 04/01/2011


Financial and economic indicators of the enterprise's activities. Analysis of the strategic position of the enterprise. Identifying problems and successes in the company's activities. Methods and models of strategy development. Development of a sales-oriented business strategy.

thesis, added 05/08/2012

It is difficult to give an example of a more well-known, visual and simple portfolio analysis tool than the BCG matrix. The diagram, divided into four sectors, with original, memorable names (“Stars”, “Dead Dogs”, “Problem Children” and “Cash Cows”) is known today to any marketer, manager, teacher or student.

The BCG Matrix is ​​a tool for strategic portfolio analysis of the market position of goods, companies and divisions based on their market growth and market share. A tool such as the BCG matrix is ​​currently widely used in management, marketing, and other areas of the economy (and not only). The BCG Matrix was developed by experts at the Boston Consulting Group, a management consulting firm, in the late 1960s, under the leadership of Bruce Henderson. The matrix owes its name to this company. In addition, the Boston Consulting Group matrix became one of the first portfolio analysis tools.

A simple but effective tool, the matrix allows you to identify the most promising and, on the contrary, the “weakest” products or divisions of the enterprise. By constructing the BCG matrix, a manager or marketer receives a clear picture on the basis of which he can make a decision about which products (divisions, product groups) are worth developing and protecting, and which should be eliminated.

Construction of the BCG matrix consists of the following steps:

• 1. Collection of initial data. The first step is to make a list of those products, divisions or companies that will be analyzed using the BCG matrix. Then they need to collect data on sales volumes and/or profits for a certain period (for example, over the past year). In addition, you will need similar sales data for a key competitor (or a number of major competitors).
• 2. Calculation of the market growth rate for the year. At this stage, you need to calculate the annual increase in sales (revenue) or profit. Alternatively, you can calculate both the increase in revenue and the increase in profit for the year, and then calculate the average.
• 3. Calculation of relative market share. Having calculated the market growth rate for the analyzed products (divisions), it is necessary to calculate the relative market share for them. There are several ways to do this. The classic option is to take the sales volume of the company’s product being analyzed and divide it by the sales volume of a similar product of the main (key, strongest) competitor.
• 4. Construction of the BCG matrix. At the fourth and final stage, the actual construction of the matrix of the Boston Consulting Group is carried out. From the origin we draw two axes: vertical (market growth rate) and horizontal (relative market share). Each axis is divided in half into two parts. One part corresponds to low indicator values ​​(low market growth rate, low relative market share), the other - high values ​​(high market growth rate, high relative market share). And the final action is the construction of the BCG matrix itself, followed by its analysis.

Analysis of the BCG matrix. Each of these squares has its own meaning and special name.

STARS. They have the highest market growth rates and hold the largest market share. They are popular, attractive, promising, developing quickly, but at the same time they require significant investment in themselves. That's why they are "Stars". Sooner or later, the growth of “Stars” begins to slow down and then they turn into “Cash Cows”.

CASH COWS (aka “Money Bags”). They are characterized by a large market share, with a low growth rate. “Cash Cows” do not require costly investments, while bringing a stable and high income. The company uses this income to finance other products. Hence the name, these products literally “milk.”

WILD CATS (also known as "Dark Horses", "Problem Children", "Problems" or "Question Marks"). It's the other way around for them. The relative market share is small, but the sales growth rate is high. Increasing their market share requires great effort and expense. Therefore, the company must conduct a thorough analysis of the BCG matrix and assess whether the “Dark Horses” are capable of becoming “Stars” and whether it is worth investing in them. In general, the picture in their cases is very unclear, and the stakes are high, which is why they are “Wildcats”.

DEAD DOGS (or Lame Ducks, Dead Weight). Everything is bad for them. Low relative market share, low market growth rates. The income they bring and profitability are small. They usually pay for themselves, but nothing more. There are no prospects. Dead Dogs should be gotten rid of or at least stopped funding them if they can be avoided.

Conclusions from the matrix. Having built and analyzed the matrix of the Boston Consulting Group, a number of conclusions can be drawn from it:

• 1. Management and commercial decisions should be made regarding the following groups of the BCG matrix:
  • a) Stars - maintaining a leading position;
  • b) Cash cows - obtaining the maximum possible profit over the longest possible period of time;
  • c) Wild cats - for promising products, investment and development;

d) Dead dogs - termination of their support and/or withdrawal from the market (discontinuation).

• 2. Measures should be taken to form a balanced portfolio according to the BCG matrix. Ideally, such a portfolio consists of 2 types of goods:
  • a) Products that currently generate income for the company. These are "Cash Cows" and "Stars". They are making profits today, right now. The funds received from them (primarily from Cash Cows) can be invested in the development of the company.
  • b) Products that will provide the company with income in the future. These are up-and-coming Wildcats. Currently, they may generate very little income, no income at all, or even be unprofitable (due to investments in their development). But in the future, under favorable conditions, these “Wild Cats” will become “Cash Cows” or “Stars” and will begin to generate good income.

Advantages and disadvantages.

Advantages of the BCG matrix:

b A well-thought-out theoretical basis (the vertical axis corresponds to the product life cycle, the horizontal axis corresponds to the effect of production scale);

b Objectivity of the estimated parameters (market growth rate, relative market share);

ь Simplicity of construction;

b Visibility and understandability;

ь Much attention is paid to cash flows;

Disadvantages of the BCG matrix:

• o Difficult to clearly define market share;
• o Only two factors are assessed, while other equally important ones are ignored;
• o Not all situations can be described within the 4 study groups;
• o Does not work when analyzing industries with low levels of competition;
• o The dynamics of indicators and trends are almost not taken into account;
• o The BCG matrix allows you to develop strategic decisions, but says nothing about the tactical aspects in the implementation of these strategies;

The BCG matrix is ​​a kind of display of the positions of a particular type of business in a strategic space defined by two coordinate axes, one of which is used to measure the growth rate of the market for the corresponding product, and the other to measure the relative share of the organization’s products in the market for the product in question.

The BCG model is a 2x2 matrix on which business areas are depicted by circles with centers at the intersection of coordinates formed by the corresponding market growth rates and the relative share of the organization in the corresponding market (see figure). Each circle plotted on the matrix characterizes only one business area characteristic of the organization under study. The size of the circle is proportional to the overall size of the entire market (in other words, not only the size of the business of this particular organization is taken into account, but in general its size as an industry across the entire economy. Most often, this size is determined by simply adding the organization’s business and the corresponding business of its competitors). Sometimes on each circle (business area) a segment is identified that characterizes the relative share of the organization's business area in a given market, although this is not necessary to obtain strategic conclusions in this model. Market sizes, like business areas, are most often measured by sales volume and sometimes by asset value.

It should be especially noted that the division of the axes into 2 parts was not done by chance. At the top of the matrix are business areas related to industries with growth rates above average, at the bottom, respectively, those with lower ones. The original version of the BCG model assumed that the boundary between high and low growth rates was a 10% increase in output per year.

The x-axis, as already noted, is logarithmic. Therefore, usually the coefficient characterizing the relative market share occupied by a business area varies from 0.1 to 10. Display of competitive position (which is understood here as the ratio of the organization's sales in the relevant business area to the total sales of its competitors) on a logarithmic scale is a fundamental detail of the BCG model. The fact is that the main idea of ​​this model assumes the existence of a functional relationship between production volume and unit cost of production, which on a logarithmic scale looks like a straight line.

Dividing the matrix along the x-axis into two parts allows us to identify two areas, one of which includes business areas with weak competitive positions, and the second - with strong ones. The border between the two regions is at the coefficient level of 1.0.

Thus, the BCG model consists of four quadrants:

Rice. 4. Presentation of the BCG model for strategic position analysis and planning

• High market growth rates / High relative market share of the business area;
• Low market growth / High relative market share of the business area;
• High market growth / Low relative market share of the business area;
• Low market growth / Low relative market share of the business area.

Stars
These usually include new business areas that occupy a relatively large share of a rapidly growing market, operations in which generate high profits. These business areas can be called leaders in their industries. They bring very high income to organizations. However, the main problem is determining the right balance between income and investment in this area in order to ensure the return of the latter in the future.

Cash cows
These are business areas that have gained relatively large market share in the past. However, over time, the growth of the relevant industry has slowed down noticeably. As usual, "cash cows" are "stars" in the past that currently provide the organization with sufficient profits to maintain its competitive position in the market. The cash flow in these positions is well balanced since the bare minimum is required to invest in such a business area. Such a business area can bring very large income to the organization.

Problem children
These business areas compete in growing industries but have a relatively small market share. This combination of circumstances leads to the need to increase investment in order to protect its market share and guarantee survival in it. High market growth rates require significant cash flow to keep up with that growth. However, these business areas have great difficulty generating revenue for the organization due to their small market share. These areas are most often net consumers of cash rather than generators of cash, and remain so until their market share changes. These business areas have the greatest degree of uncertainty: either they will become profitable for the organization in the future or they will not. One thing is clear: without significant additional investment, these business areas are likely to slide into "dog" positions.

Dogs
These are business areas with a relatively small market share in slow-growing industries. Cash flow in these areas of the business is usually very low, and often even negative. Any move by an organization towards gaining a larger market share is definitely immediately counterattacked by the dominant competitors in the industry. Only the skill of a manager can help an organization maintain such positions in the business area.

When using the BCG model, it is very important to correctly measure the growth rate of the market and the relative share of the organization in this market. It is proposed to measure market growth rates based on industry data for the last 2-3 years, but no more. An organization's relative market share is the logarithm of the ratio of the organization's sales volume in a given business area to the sales volume of the leading organization in this business. If the organization itself is a leader, then its relationship to the first organization following it is considered. If the resulting coefficient exceeds one, this confirms the organization’s leadership in the market. Otherwise, this will mean that some organizations have greater competitive advantages over this one in this business area.

(from the book “Strategic Management of an Organization” Bandurin A.V., Chub B.A.)

Publications

The difficult fate of the BCG matrix
About the disadvantages of the BCG model and the difficulties of its use

Strategic planning and the role of marketing in an organization
In particular, the article outlines some methods of strategic analysis of a business portfolio

Discussions

In this section you can ask your questions or express your opinion on this technique.

Related sections and other sites

Strategic analysis and planning »»
Strategic analysis models (BCG, etc.), strategy formation and analysis

The Boston Consulting Group
Website of the company that developed the BCG model

Ministry of Agrarian and Food Policy of Ukraine

Kharkiv National Agrarian University

Named after V.V. Dokuchaev

INDZ on the topic : “Analysis of the position of a product on the market using the additional BCG matrix”

Vikonav: 4th year student, 3rd group

Faculty: Management and Economics

Specialty: “Organization Management”

Shulzhenko Yu.A.

Verified by: Yulia Volodymyrivna

Kharkiv 2012

BCG Matrix 1

1.1Scope of application 2

1.2Description 3

BCG Matrix

Brownleft arrow- typical product life cycle, black arrows - typical investment flows

BKG Matrix(English) BCG matrix) - a tool for strategic analysis and planning in marketing. Created by the founder of the Boston consulting group, Bruce D. Henderson, to analyze the relevance of the company's products, based on their position in the market relative to the growth of the market for these products and the market share occupied by the company selected for analysis.

This tool is theoretically justified. It is based on two concepts: product life cycle* And economies of scale* or learning curve.

The matrix displays the axes of market growth (vertical axis) and market share (horizontal axis). The combination of assessments of these two indicators makes it possible to classify a product, highlighting four possible roles of the product for the company producing or selling it.

1.1Scope of application

The BCG matrix can be used in the process of strategic analysis and planning of a product program (product range), allowing for the correct distribution of resources between available products. Re-building the BCG matrix after a certain period of time can be useful in the controlling process.

1.2 Description

The Boston Matrix is ​​based on a product life cycle model, according to which a product goes through four stages in its development: access to the market(product is a “problem”), height(star product), maturity(product - "cash cow") and recession(product - "dog"). The BCG matrix is ​​a graphical display of the positions of a specific type of business in the strategic space “growth rates / market share”.

* Product life cycle- the period of time during which a product circulates on the market, starting from the moment it enters the market market and ending with its withdrawal from the market. One of the fundamental concepts of the concept of modern marketing.

Graphs characterizing changes in indicators in various phases of the life cycle. 1-Phase of entering the market;

3-Maturity;

4-Decline: A - sales;

B - profit.

Various options for the product life cycle curve: 2 - repeated cycle;

3 - "comb" curve

According to the marketing concept, any product goes through a life cycle, that is, there is a certain period of time when it is present on the market. In a typical product life cycle, there are four phases, four stages:

1. Bringing a product to market. The first appearance of a product on the market. Characteristic is a slight increase in sales volumes and, accordingly, profits are minimal or non-existent.

2.Height. A period of rapid growth in sales volume if the product is accepted by the market and demand grows on him. Profits also increase as sales volume increases.

3.Maturity. Sales volumes are significant, but further sales growth is not observed. Profit at this stage has stabilized, since additional costs are not required to bring the product to the market.

4.Decline, leaving the market. This phase of the product’s life cycle is characterized by a significant decrease in sales volumes up to a complete drop in demand for this product. Profit drops sharply to zero.

Scale effect* associated with changes in the cost of a unit of output depending on the scale of its production by the company. Considered in the long term. Reducing costs per unit of production during the consolidation of production is called economies of scale. The shape of the long-term cost curve is associated with economies of scale in production.

Classifications of types of strategic business units:

"Stars"

High sales growth and high market share. Market share needs to be maintained and increased. "Stars" bring in a lot of income. But, despite the attractiveness of this product, its net cash flow is quite low, as it requires significant investment to ensure a high growth rate.

"Cash Cows" ("Money Bags")

High market share, but low sales growth rate. “Cash cows” must be protected and controlled as much as possible. Their attractiveness is explained by the fact that they do not require additional investments and at the same time provide a good cash income. Funds from sales can be used to develop “Difficult Children” and support “Stars”.

"Dogs" ("Lame Ducks", "Dead Weight")

The growth rate is low, the market share is low, the product is generally low in profitability and requires a lot of management attention. We need to get rid of the “Dogs”.

"Problem Children" ("Wild Cats", "Dark Horses", "Question Marks")

Low market share, but high growth rates. “Difficult children” need to be studied. In the future, they can become both stars and dogs. If there is a possibility of transferring to the stars, then you need to invest, otherwise, get rid of it.

Flaws

Great simplification of the situation;

The model takes into account only two factors, but high relative market share is not the only factor of success, and high growth rates are not the only indicator of market attractiveness;

Failure to take into account the financial aspect, the removal of dogs can lead to an increase in the cost of cows and stars, as well as a negative impact on the loyalty of customers using this product;

The assumption that market share corresponds to profit, this rule may be violated when introducing a new product to the market with large investment costs;

The assumption is that the market decline is caused by the end of the product's life cycle. There are other situations in the market, for example, the end of rush demand or an economic crisis.

Advantages

theoretical study of the relationship between financial receipts and analyzed parameters;

objectivity of the analyzed parameters (relative market share and market growth rate);

clarity of the results obtained and ease of construction;

it allows you to combine portfolio analysis with a product life cycle model;

simple and easy to understand;

It is easy to develop a strategy for business units and investment policies.

Construction rules

The horizontal axis corresponds to the relative market share, the coordinate space from 0 to 1 in the middle in increments of 0.1 and then from 1 to 10 in increments of 1. The assessment of market share is the result of an analysis of the sales of all industry participants. Relative market share is calculated as the ratio of one's own sales to the sales of the strongest competitor or the three strongest competitors, depending on the degree of concentration in a particular market. 1 means that your own sales are equal to those of your strongest competitor.

The vertical axis corresponds to the market growth rate. The coordinate space is determined by the growth rates of all company products from maximum to minimum; the minimum value can be negative if the growth rate is negative.

For each product, the intersection of the vertical and horizontal axis is established and a circle is drawn, the area of ​​which corresponds to the product’s share in the company’s sales volumes.

BCG Matrix helps to perform two functions: making decisions about intended positions in the market and distributing strategic funds between different areas of management in the future.

Among the advantages of the BCG matrix as a tool strategic management First of all, it is worth noting its simplicity. The matrix is ​​very useful when choosing between different agricultural sectors, determining strategic positions and when allocating resources for the near future. However, due to its simplicity, the BCG matrix has two significant disadvantages:

all SZHs, the situation in which the company is analyzed using the BCG matrix, must be in the same phase of life cycle development;

within the agricultural sector, competition should proceed in such a way that the indicators used are sufficient to determine the strength of the company’s competitive position.

If the first flaw is fatal, i.e. SZHs located at different stages of the life cycle cannot be analyzed using this matrix, then the second drawback can well be eliminated. In the process of improving the BCG matrix, the authors proposed completely different indicators. The main ones are presented in Table 2.

Table 2. Indicators for assessing the strategic position using the BCG matrix.

The indicator of a company's future competitiveness in the market is determined by the ratio of the expected return on capital and the optimal (or basic) return on capital. In fact, this is the company's predicted return on equity or an analysis of the trend in this indicator in recent years. In general, the attractiveness of SZH can be calculated based on the ratio:

Attractiveness SZH = aG + bP + cO – dT,

where a, b, c and d are the coefficients of the relative contribution of each factor (total 1.0), G – market growth prospects, P – market profitability prospects, O – positive environmental impacts, T – negative environmental impacts aspects of the environment.

As an example, consider a representation using the BCG matrix strategic positions Randy's hypothetical organization in a number of business areas in the tea market. A study of the organization's business showed that it actually competes in 10 areas of the tea market (Table 1).

Table 1. Characteristics of business areas of Rendi’s organization in the tea market

The BCG model for the considered business areas of Randy’s organization is as follows (Fig. 3).

Rice. 3. BCG matrix of businesses of Rendy’s organization in the tea market

A quick glance at the resulting model suggests that Randy's organization places an undue emphasis on the business area of ​​"US private label tea." This area is in the "dog" category, and although the growth rate of this market segment is quite high (12%), Randy has a very powerful competitor in the form of Cheapco, whose share of this market is 1.4 times greater. Therefore, the profit margin in this area will not be high. If in relation to the future of such a business area as “US private label tea”, one can still think about whether to continue making investments here to maintain its market share or not, then in relation to “varietal tea from Europe”, “varietal tea from Canada" and "high-quality tea from the USA" everything turns out to be extremely clear. We need to get rid of this kind of business as soon as possible. The investment Randy's organization makes in maintaining this business results in neither increased market share nor increased profits. In addition, the market itself for these types of tea shows a clear trend towards fading. It is obvious that Randy's organization clearly does not notice the prospects associated with the development of the market for "USA fruit tea" and "USA herbal tea." These areas of the business are the clear stars. Investments in developing a share of this market could result in significant returns in the near future.

Construction of the BCG matrix in practice

Needs to be developed strategy company regarding its product portfolio, using the technique BCG. To do this, it is necessary to calculate the current indicators of the methodology, build BCG matrix, identify strategically unattractive products and exclude them from production, and then, recalculating the indicators, build new BCG matrix.

We will produce calculation BCG matrix indicators. Let's calculate the indicator market growth (MR). This indicator characterizes the movement of goods on the market, which is expressed through the change in the volume of sales (sales) of a given product (the result of a given business process) for the last period of time under consideration (in a simplified version, the ratio of sales for the last period to the penultimate period). Hence,

PP1=564.96/256.8=2.2;

PP2=124.4/124.41=0.99992;

PP3=132.95/133.98=0.992312;

PP4=115.0/116.44=0.987633;

PP5=1001.52/256.8=3.9;

PP6=75.18/175.45=0.428498;

PP7=122.99/67.48=1.822614;

PP8=350.92/87.73=4;

PP9=47.69/73.37=0.649993.

Let's calculate the indicator Relative market share (RMS). This parameter is determined by the ratio of the enterprise’s market share to the share of the leading competing company, and the enterprise’s market share is determined as the ratio of sales volume to the market capacity of a given product. ODR 1 =8/32=0.25; ODR 2 =50/50=1; ODR 3 =62/31=2; ODR 4 =57/43=1.32558; ODR 5 =2/14=0.14286; ODR 6 =7/6=1.16667; ODR 7 =12/88=0.13636; ODR 8 =6/7=0.85714; ODR 9 =16/32=0.5.

The diameter of the circle, expressed in relative units (the sales volume of one of the goods is taken as a unit), is selected in proportion to the share of the product volume in the sales volume (it is necessary that you can “work” with the matrix, so you need to be careful when choosing a standard).

Let us correlate the resulting diagram with the BCG matrix. The boundaries of the matrix quadrants are shown here by arrows. Each product (product numbers are marked with numbers) produced by a company corresponds to its own quadrant of the BCG matrix. So,

Of the goods produced by the company (as follows from the description of the areas of the BCG matrix), only the “Hippopotamus Cat” toy, which belongs to the “Cash Cows” area (on the border with the “Stars” area), brings a stable profit. When compiling a new product portfolio for a company, you should focus on the most promising products. However, in this case, it turns out that most of the company's products fall into the "Wild Cats" or "Dogs" area. Products classified as “Wild Cats” are undoubtedly promising because they are located in rapidly growing markets, but their promotion requires large financial expenditures from the company. In this case, a stable influx of funds is provided by only one product, “Hippopotamus Cat,” the profit from the sale of which cannot cover the number of ongoing projects classified as “Wild Cats.”

In addition, the company's portfolio includes four products classified as "Dogs". Typically, these types of products do not bring significant profits and their release is justified only within a dedicated market in the absence of serious risks, on the global market, or in cases where the release of this product gives the company additional competitive advantages. In this case, we are working in a simplified situation, so we will assume that goods classified as “Dogs” are not profitable for the company. In a real situation, it would be necessary to study the detailed information for each product in more detail.

So, we believe that “Dogs” are not profitable for the company, therefore, the company can exclude them from its product portfolio. Four “Wild Cats” require a very large influx of funds, therefore, it is not profitable for the company to produce all these products at the same time. It would be reasonable to single out one or two products (the most promising for the company) and invest in them all the funds that will be freed up from the discontinuation of “Dogs” and additional “Wild Cats”.

Since we work in a simplified situation, we will choose one product that is most promising for the company. In this case, the most promising products are 5 (Dolmatian toy) and 8 (Elephant toy). Product 5 has the largest share in the company’s total sales volume, product 8, having the same level of PP indicator as product 5, has the highest level of ODR indicator among the “Wild Cats”. Let's choose product 8, which has most “advanced” to the “Stars” area of ​​the BCG matrix.

1. Based on the sales indicator (V sales) of the 8th product, we calculate the total V market for this product = (old sales indicator (V sales))/(firm market share for this product) 100 = 350.92/6 100 = 5848.67.

2. For products 1, 2, 4, 5, 6, 7, 9, which are withdrawn from the market, we calculate the total amount intended for redistribution =S(V sales)·(cost coverage) = 282.48+52.248+37, 95+701.064+ 24.058+73.794+25.753=1197.346.

3. Increase in sales (sales) = 1197.346/(coverage of costs of product 8) = 1596.461.

4. New market V=(old market V)+1596.461=5848.67+1596.461=7445.13.

5. New V sales = (old sales (V sales) of product 8) + (sales growth) = 350.92 + 1596.461 = 1947.381.

6. The company’s new market share = (new sales V)/(new market V) = 1947.381/7445.13 = 0.262.

7. V sales of the main competitor = (old V market) · (market share of the main competitor) = 5848.67 · 0.07 = 409.41.

8. New market share of the main competitor = (V sales of the main competitor)/(new V market) = 409.41/7445.13 = 0.055.

9. New ODR = (new market share of the company)/(new market share of the main competitor) = 0.262/0.055 = 4.76.

10. New PP = (new sales V)/(product sales for the last year 2002) = 1947.381/87.73 = 22.197.

So, new product portfolio will

On practice Usually it is necessary to reconsider various options of actions, the selection of which allows us to develop an optimal strategy for the development of the company’s product profile.

Obtained as a result of analysis using the BCG method product strategy turns out to be very attractive, since it allows, by discontinuing not very promising products, to turn one of the “Wild Cat” products into an undeniable “Star”. Such strategic move will allow the company to gain a strong place in the children's product market and possibly receive the necessary funds to promote new (at this stage rejected) products, but this is a matter of future development of strategic lines. However, it should be noted that in practice it is necessary to treat the results obtained with caution and check them multiple times, considering various options for the future strategy (in order to eliminate missed opportunities).