The growth share matrix was created in 1968 by BCG’s founder, Bruce Henderson. It was published in one of BCG’s short, provocative essays, called Perspectives. At the height of its success, the growth share matrix was used by about half of all Fortune 500 companies; today, it is still central in business school teachings on strategy. The BCG matrix, also known as the BCG growth-share matrix, growth market share matrix, or product portfolio matrix, helps businesses with the long-term planning of their products. This tool helps companies determine which products warrant discontinuing, development, or further investing.
- Nov 18, 2018 - The Boston Consulting Group (BCG) Matrix. Business Dtrategy Model. See more ideas about business strategy, matrix, business.
- The BCG Matrix for Microsoft will help Microsoft in implementing the business level strategies for its business units. The analysis will first identify where the strategic business units of Microsoft fall within the BCG Matrix for Microsoft.
The BCG Model is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. It has 2 dimensions: market share and market growth. The basic idea behind it is that the bigger the market share a product has or the faster the product's market grows the better it is for the company.
Placing products in the BCG matrix results in 4 categories in a portfolio of a company:
1. Stars (=high growth, high market share)
- use large amounts of cash and are leaders in the business so they should also generate large amounts of cash.
- frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept.
2. Cash Cows (=low growth, high market share)
- profits and cash generation should be high , and because of the low growth, investments needed should be low. Keep profits high
- Foundation of a company
3. Dogs (=low growth, low market share)
- avoid and minimize the number of dogs in a company.
- beware of expensive ‘turn around plans’.
- deliver cash, otherwise liquidate
4. Question Marks (= high growth, low market share)
- have the worst cash characteristics of all, because high demands and low returns due to low market share
- if nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog.
- either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market share or deliver cash
The BCG Method can help understand a frequently made strategy mistake: having a one-size-fits-all-approach to strategy, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation.
In such a scenario:
A. Cash Cows Business Units will beat their profit target easily; their management have an easy job and are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash amounts in their businesses which are mature and not growing anymore.
B. Dogs Business Units fight an impossible battle and, even worse, investments are made now and then in hopeless attempts to 'turn the business around'.
C. As a result (all) Question Marks and Stars Business Units get mediocre size investment funds. In this way they are unable to ever become cash cows. These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become a cash cow (or star), or otherwise companies are advised to disinvest and try to get whatever possible cash out of the question marks that were not selected.
Some limitations of the Boston Consulting Group Matrix include:
High market share is not the only success factor
Market growth is not the only indicator for attractiveness of a market
Sometimes Dogs can earn even more cash as Cash Cows
Book: Carl W. Stern, George Stalk - Perspectives on Strategy from The Boston Consulting Group
T I P : Here you can discuss and learn a lot more about the BCG Matrix.
Compare with the BCG Matrix: GE / McKinsey Matrix | ADL Matrix | Core Competence | Bass Diffusion model | Relative Value of Growth | STRATPORT | Profit Pools | Product Life Cycle | Blue Ocean Strategy | Four Trajectories of Industry Change | Positioning
Microsoft CEO Satya Nadella introduces the new version of the company’s signature product, Windows 10.
Microsoft has announced that its new Windows 10 will be a free upgrade for a wide range of current Windows users. This accompanies the company’s similar offers of free Microsoft Office apps for users of iOS and Android systems.
Bcg Matrix Of Microsoft Company Information
Windows is Microsoft’s signature product, the operating system that at one time ran the vast majority of personal computing devices, propelling Microsoft to a market dominance that the federal government sought to curtail with an antitrust action in the 1990s. MS Office featuring Word, Excel and PowerPoint has been the leading productivity suite for years as Microsoft overwhelmed early leaders such as WordPerfect and Lotus 1-2-3. The Microsoft divisions responsible for Windows and its productivity software have historically earned the bulk of the company’s profit, “cash cows” per the BCG Matrix.
So why give these products away in 2015? Is this a case of killing the cash cows (akin to liquidating the goose that laid the golden egg)?
The rationale becomes clearer with an examination of the BCG Matrix. This analysis method divides areas of a business into four categories:
- Stars: Business units or products with high growth rate and high market share. They typically require heavy investment (e.g., extensive marketing campaigns) as they increase share and solidify their success.
- Cash Cows: Market leaders with low growth rates that produce consistent income without heavy investment. They generate the money required to finance the company’s other endeavors.
- Question Marks: High growth rate but low market share. They consume cash while the company determines if they are turning into stars.
- Dogs: Low growth and low share. The name says it all.
Microsoft has treated Windows and Office as stars instead of cash cows, failing to develop true stars to stimulate or at least harness changes in consumer trends. Its best attempt to branch out has been its gaming division, dominant in its market but a frequent money-loser.
The company acted oblivious to the shift to mobile computing. In 2007, it released the disastrous, bloated Windows Vista while Apple launched the iPhone. Its belated attempt to assert itself in the mobile space, Windows 8, was also derided as clunky and blamed for accelerating the downturn in PC sales, the very product that Microsoft was trying to support with its “dual” operating system approach.
Sales of Windows have continued to decline with the drop in PC sales. Office no longer enjoys unquestioned ubiquity as consumers have found substitute products that are cheaper or even free, such as Google Docs. CEO Steve Ballmer stepped down as Microsoft was increasingly deemed a has-been, its revenue currently one-third of Apple’s.
Bcg Matrix Of Microsoft Company Information
Microsoft’s new CEO, Satya Nadella, has promised a turnaround. Microsoft’s cloud computing services and mobile devices are increasing in sales. The Windows and Office giveaways are designed to keep people using Microsoft products while introducing them to the company’s latest offerings. They may be free for many consumers now, but Windows and Office are finally being used like true cash cows, supporting Microsoft’s direction for the future.
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