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Introduction

Boston Consulting Group Matrix (BCG Matrix) According to Sadler and Craig (2003:54), the BCG matrix is a corporate portfolio analysis tool that provides a graphic representation of an organization that is used to scrutinize the different businesses involved in the portfolio on the basis of the related market share and industry growth rate. However, it is also a model based on the product-life cycle theory that is used to determine the priorities that are supposed to be given in the product portfolio of a business unit in order to ensure that long-term value is created (Sadler and Craig, 2003:54). Therefore, a company needs to have a portfolio of products that comprise of both the high-growth products in order to create the need of cash inputs and low-growth products that generates a lot of cash (Sadler and Craig, 2003:54). Furthermore, the BCG matrix can be elaborated as a two dimensional analysis on management of the Strategic Business Unit (SBU), generally meaning that it is a comparative analysis of a business potential and the environmental evaluation (Warren, 2008:344). Thus, the two dimensions are the relative market share (SBU sales this year leading to the competitors sales this year) and market growth rate (industry sales this year minus the industry sales last year) and this analysis entails that both measures be calculated for each SBU (Warren, 2008:344). However, the relative market share is the strength of the business dimension and it measures the comparative advantage indicated by market dominance while the market share is achieved due to the overall cost leadership (Warren, 2008:344). ...read more.

Middle

The last cell being dogs represent businesses that have a weak market shares in low-growth markets and they neither produce cash nor require an enormous amount of cash (Lechner and Floyd, 2012: 460). Therefore, because of the of the low market share, these business units are faced with costs disadvantages leading to retrenchment policies to be implemented in order to be able to help these firms gain market share at the competitor or rivals expense (Lechner and Floyd, 2012: 460). However, the BCG matrix produces a framework with the allocation of resources among the different business units found in the industry making it possible to compare the business units at a momentary look and the matrixes has limitations and are as follows: the BCG matrix classifies business as low and high forgetting the fact the a business can also be regarded as medium restricting the proper nature of the business to be revealed (Lechner and Floyd, 2012: 460). Furthermore, the model cannot properly define market and the high market share does not constantly lead to high profits but there are high costs that are associated with high market share (Lechner and Floyd, 2012: 460). The model's growth rate and relative market share are not the only key indicators of profitability as it ignores and sometimes overlooks other possible indicators of profitability (Lechner and Floyd, 2012: 460). As a result the dog can sometimes help other businesses in increasing competitive advantage so that they can be able to earn even more than cash cows, thus this model (four-celled approach) ...read more.

Conclusion

The tip at the end of arrow shows the future position of the centre point of the circle (Collis et al, 2009:125). However, the GEBS has strategic implication that can lead to a positives outcome on the business unit and are as follows: it helps business units grow strong in attractive industries, average business units in attractive industries and strong business units' average industries; it is able to hold an average business in average industries, strong businesses in weak industries and weak businesses in attractive industries; and lastly being able to harvest weak business units in unattractive industries, and weak business units in average industries (Collis et al, 2009:125). While GEBS symbolizes an improvement over the simple BCG growth-share matrix, it still presents a limited view by failing to consider the interactions among the various business units by disregarding the need to address the core competencies that lead to value creation (Collis et al, 2009:125). Thus, GEBS further fails to serve resource allocation as their primary tool for and this is evidence that portfolio matrices are better suited to displaying a quick synopsis of the strategic business units (Collis et al, 2009:125). List of Reference COLLIS, D.J., CAMPBELL, A. and GOOLD M., 2009. The General Electric Screen. Harvard Business Review. 40, 3:123-125. LECHNER, C., and FLOYD, S.W., 2012. The impact of the BCG matrix in an organization. Strategic Management Journal. 33, 5:460-462. SADLER, P. and CRAIG, J.C., 2003. Strategic Management. (2e). United Kingdom: London. WARREN, K., 2008. Strategic Management Dynamics. London: Routledge. ...read more.

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