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BCG Matrix

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Theoretical Path to Success

Relative Market Share
High
Low
High
Market
Growth
Rate
Low

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What is Relative Market Share?

In BCG terms, ratio of your market
share to that of your largest competitor

If you have a higher share than that of your largest

competitor Your Relative Share is > 1
If you have a lower share than that of your largest
competitor ... Your Relative Share is < 1
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Plotting Market Growth Rate

Is plotted on the vertical axis
Uses a simple % scale
The range and midpoint is
dependent on analysis and type of
industry
In Information Technology the High
may be 50, the Low 10, and the
average (midpoint) 30
In Tobacco, the High may be 10, the
Low -10, and the midpoint 0

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Illustration

High = 12
Low = -5 Ave. = 3
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The Chemical Portfolio

The bubbleshave been

positioned from the RMS and
Market Growth data

The circle size has been

calculated from the annual
turnover

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BCG Cash Quadrants (Day 1977)

Balancing v.talwar@jre.edu.in
the product portfolio (Day 1977)

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Which is a Better Portfolio?

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Why do Marketers Love Such Models?

Not thinking of the approach as a comprehensive theory
but as a tool (Morrison and Wensley 1991)
Rapidly adopted because of their appealing visual
displays and the immediate comparisons and
recommendations offered (Brown, 1991).
Fulfills an innate human desire for taxonomy and the
classifications offered easy-to-grasp catch phrases
(Hooley and Saunders, 1993).
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1970s: the brand is born

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1980s: early growth/survival

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1990s: entrepreneurial start ups

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Virgin brand so far: Transport & Travel

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Why do some Academics Despise such Models?

Not designed for new business opportunities and inhibits creative thinking
(Day 1986)

Strategic recommendations sometimes too drastic (for e.g. for Dogs),

especially in mature markets with slow growth rates (Gelderman 2003)

Fundamental assumptions questioned (for e.g. relationship between market

share and profitability) (Jacobson and Aaker 1985)

Rely on managerial judgement to identify the relevant factors and determine

their relative importance (Gelderman, 2003)

According to Wind and Mahajan (1981), two businesses with very different
underlying factors could find themselves in the same position on the matrix
simply on the basis of their summed up scores.

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