• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Analysis of the Boston Consulting group Matrix

Extracts from this document...

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.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Management Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Management Studies essays

  1. Tesco analysis

    All the above refer to Appendix 1 which is related to Tesco, Appendix 2 which is related to WM Morrison and Appendix 3 which is related to calculations. Value Chain Analysis The Primary Activities Within the primary activities it can be seen that a key element of Tesco's strategy is

  2. General Management - organisation, leadership and theories.

    They lead with too much focus on what they want done, rather than from an awareness of followers' mindset. Often, the personality traits that make for effective managers can make them terrible leaders, especially once their role expands beyond leadership based on their personal charisma and implementation skills.

  1. Innovation For Business Success. It is possible to be innovative in both large ...

    Similar has occurred in risk management. As a result, Newcrest has delivered above average EBIT (http://www.newcrest.com.au//upload/534_3x12x2008105615AM.pdf), and through a continuing commitment on its people development as well, every expectation that its innovation capability and the performance that this delivers will continue. Many of the Newcrest improvements have been based on methods improvements that have not needed any or much capital outlays (http://www.newcrest.com.au//upload/491_7x07x200855001PM.pdf).

  2. Personal Devlopment Portfolio

    Target dates: 20-10-06 23-10-06 09-11-06 23-11-06 Types of evidence: Feedback from colleague (also class tutor) Presentation attached Feedback attached Feedback attached Review and Evaluation: Started to develop IT skills and identified areas of improvement. Initially the task seemed tough, so as how to improve upon certain areas.

  1. Photovoltaic Industry Analysis

    1970s With help from Exxon Corporation, Dr. Elliot Berman designs a significantly less costly solar cell, bringing the price down from $100 per watt to $20 per watt. Solar cells begin powering navigation warning lights and horns on offshore gas and oilrigs, lighthouses, and railroad crossings.

  2. A Strategic Analysis of J Sainsbury PLC

    None of these in themselves seem to offer major advantages to the current structure 1.4 The Future of Sainsbury's Organisation Structure Sainsbury's business principles and operating style seem well suited to the predominantly divisional, decentralised structures currently in place. This allows freedom for businesses to act on the basis that they know their customers and business issues best.

  1. Boots the Chemist Business Analysis

    * Strong labour workforce which is highly essential to every business, this could be a major tool when trying to refocus and achieve the overall objectives. * The current share price is 667.0p on 8 Nov and has risen since October 28 when it was valued at 657.5p.

  2. The internet has fundamentally altered the dynamics for industries

    use internet as a tool for positioning a business in a competitive environment. Lee (2001) suggests that most companies are faced with challenges, not on how to imitate or benchmark the best e-commerce business model in their industry but on how to fundamentally change the mindset of operating the traditional business.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work