Usually, these product lines manage to earn what is put into them, breaking-even and maintaining the market share. The y-axis of the graph represents rate of market growth while the x-axis represents market share.
Monopolies and first-to-market products are frequently termed stars. To grow, you need to invest in your assets. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance.
Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. If successful, a star will become a cash cow when the industry matures.
There is an underlying assumption that the business units are operating in isolation in relation to each other. Where you choose to set the dividing line between each quadrant depends in part on how your company compares to the competition. Cash cows require little investment and generate cash that can be utilized for investment in other business units.
There is no specific strategy which can be adopted. At times, dogs may help other businesses in gaining competitive advantage. Here is a breakdown of each quadrant: Dogs are generally considered cash traps because businesses have money tied up in them, even though they are bringing back basically nothing in return.
Stars — These brands have a high share in a high growth market. They can earn even more than cash cows sometimes. High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash, which is used as investment to stimulate further growth.
The matrix has been used since to help companies gain insights on what products best help them capitalize on market share growth opportunities.
According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share.
This analysis used the annual report for its figures which can be found here. This matrix does not take into account any other factors that may have a bearing on both industry attractiveness and competitive advantage.
These businesses usually follow stability strategies. The brands of WhiteWave Foods, which is among the best-performing midsize companies, include Horizon organic dairy, Silk plant-based beverages, and Vega plant-based food and beverage products.
The size of each circle should correspond to business revenue generated by the brand. Generally this unit is largely worthless to the company in terms of earning potential but may afford other benefits to the company such as the creation of jobs as well as synergies that assist other business units.
Despite challenging market conditions, CPG growth opportunities remain numerous and diverse. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry.
The growing popularity of healthier food options does not mean that US consumers have lost their willingness to indulge. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars. When examining market growth, you need to objectively compare yourself to your largest competitor and think in terms of growth over the next three years.
Thus, the true nature of business may not be reflected. In the end, question marks, also known as problem children, lose money. Online industry reports can be used to find the rate of growth for the industry. The way a market is defined in such an instance may change its definition from a dog to a cash cow.
Following the choice of the unit or area to be analyzed, the most important stage for the rest of the matrix is the definition of the market. Market growth is one of many factors that determine industry attractiveness and relative market share is only one of many factors that determine competitive advantage.
The result in plotted on the x-axis. These product lines have a clearly visible market or niche leading path and require large amounts of funding to ensure that they can fight of competitors and maintain their growth rate.
They neither generate cash nor require huge amount of cash. In some cases, this is because small companies are getting better placement on retail shelves or they are having their brands distributed by large CPG companies. These are business units or products that have a high market share but low growth prospects.
But this is not always the truth. Both kinds are needed simultaneously. Careful study and analysis is required for business units in this category to assess their potential and worth. The reason behind the selection of this metric is based on its relationship with the experience curve.HOW TO APPLY BCG MATRIX TO YOUR BUSINESS “To be successful, a company should have a portfolio of products with different growth rates and different market shares.
The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Munchy Food Industries Sdn Bhd (doing business as Munchy's) is a Malaysia-based snack food manufacturer with presence in over 60 countries around the world.
Its group headquarters is in Batu Pahat and its corporate headquarters is in Klang. The US consumer packaged goods industry registered its strongest growth in four years inand much of the fuel was provided by small and midsize producers.
The BCG model is basedon classification of products (and implicitly also company business units) into four categoriesbased on combinations of market growth and market share relative to the largest ultimedescente.com order to elaborate the BCG matrix, I have chose Engro foods limited.
The role of cash flow in the matrix. Understanding cash flow is key to making the most of the BCG matrix. InBCG founder Bruce Henderson noted that four rules are responsible for product cash flow: Margins and cash generated are a function of market share.
High margins and high market share go together. To grow, you need to invest in your assets. BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis) axis.Download