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% Sales
19
12
25
09
14
20
01
100
So, to analyze the current situation we will form a BCG matrix and
recommend decision on its results.
BCG matrix will help us to examine distributors in he companys
portfolio on the basis of their related market share and industry growth
rates.
In other words, it is a comparative analysis of business potential and
the evaluation of environment.
According to this matrix, business could be classified as high or low
according to their industry growth rate and relative market share.
Relative Market Share = SBU Sales this year / leading competitors
sales this year.
Market Growth Rate = Industry sales this year - Industry Sales last
year.
The dimension of business strength, relative market share, will
measure comparative advantage indicated by market dominance. The
key theory underlying this is existence of an experience curve and that
market share is achieved due to overall cost leadership.
BCG matrix has four cells, with the horizontal axis representing relative
market share and the vertical axis denoting market growth rate. The
mid-point of relative market share is set at 1.0. if all the SBUs are in
same industry, the average growth rate of the industry is used. While,
if all the SBUs are located in different industries, then the mid-point is
set at the growth rate for the economy.
Resources are allocated to the business units according to their
situation on the grid. The four cells of this matrix have been called as
stars, cash cows, question marks and dogs. Each of these cells
represents a particular type of business.
Here, the relative market share can be calculate from the data given
above. But the market growth rate which is used as a proxy to the cash
out flows has not been given so we will analyse our customers that is
the six major distributors on the basis of the information given and
from the information give we deduce the following parameters to see
how productive these customers are. The parameters are as follow:
Discount Required
Delivery Distance
Unique Packaging
Urgent order frequency
Payment handling
Volume of Sales
Order frequency
Now, we rate all the six customers on an 11 point scale i.e. from -5 to 5
and evaluate their performance, where we do not have any information
we give a zero that is we have a neutral position towards it.
Parameters
Customers
Ardro Butle Canhi Donleav Englan Franksto
n
r
ll
y
d
n
Discount
4
-3
5
-5
4
0
Required
Delivery Distance
0
-5
0
0
0
5
Unique Packaging
5
-5
5
0
0
0
Urgent Order
5
-3
4
-4
5
-3
Frequency
Payment
0
0
5
-5
5
-5
Handling
Volume of Sales
4
2
5
1
3
4
Order Frequency
5
3
3
-5
5
-3
Total
23
-11
27
-18
22
4
For Example: For Ardron Wafers from the information given we have
that it requires low discounts for the volume and it maintains large
inventory and thus have highly predictable delivery requests and
holding requirements. Thus, on the scale we give it a 4 for asking low
discounts and 5 for order frequency as its delivery request are highly
predictable. Also as it employ standard packaging thus it has no unique
packaging and thus we give it a 5 on that parameter.
The same is done for all the six customers (dealers) and thus it
substitutes the market growth parameter on our BCG Matrix.
Now, we calculate the relative market share from the data given
above:
Relative Market Share = SBU Sales this year / leading competitors
sales this year.
Customer
Market Share
ln(RMS)
19
12
25
09
14
Relative Market
Share (RMS)
0.76
0.48
1.25
0.36
0.56
Ardrons Wafers
Butler Ices
Cahills Cones
Donleavy Ices
England
Wedges
Frankston Chocs
20
0.80
-0.22
-0.27
-0.73
0.22
-1.02
-0.58
Now for our BCG we have ln(RMS) on the x-axis and the total figure of
the customer assessment on the y-axis.
Customer
Ardrons Wafers
Butler Ices
Cahills Cones
Donleavy Ices
England Wedges
Frankston Chocs
ln(RMS)
-0.27
-0.73
0.22
-1.02
-0.58
-0.22
Total Customer
Evaluation Score
23
-11
27
-18
22
4
Ardons Wafers: They have very few demands and are also a
regular and reliable customer and comes under the ? category
and thus should be promoted so as to make it a star one day.