Sie sind auf Seite 1von 22

Table of Contents

1.BCG Matrix ................................................................................................................................. 1

1.2.Components of BCG Matrix ................................................................................................. 3

1.3.Benefits of the BCG-Matrix: ................................................................................................. 5

1.4.Limitations of BCG Matrix ................................................................................................... 5

1.5. Assumptions ......................................................................................................................... 6

1.6. Components Of BCG (In short) ........................................................................................... 7

1.6.1.DOG................................................................................................................................ 7

1.6.2.QUESTION MARK (Problem Child) ............................................................................ 7

1.6.3.STAR .............................................................................................................................. 7

1.6.4. CASH COW .................................................................................................................. 7

2.GE McKinsey Matrix ................................................................................................................... 8

2.1.Definitions ............................................................................................................................. 8

2.2.What is GE McKinsey matrix? ............................................................................................. 8

2.3. Understanding the Tool ........................................................................................................ 8

2.4.Industry Attractiveness ........................................................................................................ 10

2.4.1.Market Factors .............................................................................................................. 10

2.4.2.Pestel Factors ................................................................................................................ 10

2.4.3.Porters Five Forces ....................................................................................................... 10

2.5.Business Unit Strength ........................................................................................................ 10

2.6.Advantages of GE Matrix ................................................................................................... 11

2.7.Disadvantages of GE Matrix ............................................................................................... 11

2.8.Investment Implications ...................................................................................................... 11

2.9.Comparison with the BCG Matrix ...................................................................................... 12

3.McKinsey 7’s Model.................................................................................................................. 13


3.1.Definition ............................................................................................................................ 13

3.2.Understanding the tool ........................................................................................................ 13

3.3. McKinsey 7s Factors .......................................................................................................... 14

3.3.1.Strategy ......................................................................................................................... 15

3.3.2.Structure........................................................................................................................ 15

3.3.3.Systems ......................................................................................................................... 15

3.3.4.Skills ............................................................................................................................. 16

3.3.5.Staff .............................................................................................................................. 16

3.3.6.Style .............................................................................................................................. 16

3.3.7.Shared Values ............................................................................................................... 16

3.4.How to Use the Model ........................................................................................................ 17

3.5.Application of 7S ................................................................................................................ 17

3.6. McKinsey 7-S Checklist Questions.................................................................................... 18


Table of Figures

Figure 1: BCG Matrix .................................................................................................................................. 3


Figure 2: GE Matrix ...................................................................................................................................... 9
Figure 3: 7-S Factors................................................................................................................................... 14
1.BCG Matrix

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed in
1970s by Bruce Henderson, BCG, USA. The model compares each business unit of a
company against its main competitor in terms of market growth and market share. It is the
most renowned corporate portfolio analysis tool. It provides a graphic representation for an
organization to examine different businesses in its portfolio on the basis of their related market
share and industry growth rates. It is a two dimensional analysis on management of SBU’s
(Strategic Business Units). In other words, it is a comparative analysis of business potential and
the evaluation of environment.

This business tool helps companies determine the best performing product lines or businesses so
that they can plan a right investment strategy. For instance, if a business has a wide product
portfolio, managers have to know how the different products are doing in the market so that they
can wisely allocate their time and cash to the most prospective portfolio. Managers use the BCG
matrix to see which products have the highest potential to increase company’s profitability and
which are gradually becoming company’s liabilities.

The main objective of using BCG matrix is to build an effective portfolio strategy. The matrix
classifies a product line based on two major dimensions:

 A product’s competitive position in the market (relative market share)


 The growth rate of the industry

If a company has several brands to look after, this matrix will help the managers decide which
brand they should invest in and which brands should be divested ideally. This reduces the
wastage of money and time investments.

When applying the framework, managers draw a square diagram and divide it into four equal
quadrants. The four quadrants are named as Cash Cows, Dogs, Stars and Question Marks. The

1
horizontal axis represents market share, and the vertical axis indicates the speed of market
growth.

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. In simple
terms, market share against that of its leading competitor

Market Growth Rate = Industry sales this year - Industry Sales last year.

Market Growth rate is defined as the rise in sales or market size within a given customer base
over a specific period of time.

The analysis requires that both measures be calculated for each SBU. 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.

When applying the framework, managers draw a square diagram and divide it into four equal
quadrants. The four quadrants are named as Cash Cows, Dogs, Stars and Question Marks. The
horizontal axis represents market share, and the vertical axis indicates the speed of market
growth.

According to this matrix, business could be classified as high or low according to their industry
growth rate and relative market share.. The mid-point of relative market share is set at 1.0. if all
the SBU’s are in same industry, the average growth rate of the industry is used. While, if all the
SBU’s are located in different industries, then the mid-point is set at the growth rate for the
economy.

2
Figure 1: BCG Matrix

1.2.Components of BCG Matrix

1. Stars- Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge
investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this
cell are attractive as they are located in a robust industry and these business units are
highly competitive in the industry. If successful, a star will become a cash cow when the
industry matures.

2. Cash Cows- Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and generate cash that
can be utilized for investment in other business units. These SBU’s are the corporation’s
key source of cash, and are specifically the core business. They are the base of an
organization. These businesses usually follow stability strategies. When cash cows lose
their appeal and move towards deterioration, then a retrenchment policy may be pursued.

3
3. Question Marks- Question marks represent business units having low relative market
share and located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the venture can be
viable. Question marks are generally new goods and services which have a good
commercial prospective. There is no specific strategy which can be adopted. If the firm
thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the
company tries to enter a high growth market in which there is already a market-share. If
ignored, then question marks may become dogs, while if huge investment is made, then
they have potential of becoming stars.

4. Dogs- Dogs represent businesses having weak market shares in low-growth markets.
They neither generate cash nor require huge amount of cash. Due to low market share,
these business units face cost disadvantages. Generally retrenchment strategies are
adopted because these firms can gain market share only at the expense of
competitor’s/rival firms. These business firms have weak market share because of high
costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim,
it should be liquidated if there is fewer prospects for it to gain market share. Number of
dogs should be avoided and minimized in an organization.

A. Relative Market Share – A higher market share means higher cash return. The
reason behind the selection of this metric is based on its relationship with the
experience curve. The belief is that when the company produces more products, it
benefits from higher economies of scale and the experience curve which in turn
result in higher profits. The market share is measured relative to its largest
competitor. Another reason for the selection is that this indicator carries more

4
information than just cash flows as is the case in profits. It shows the brand’s
position in relation to major competitors and a likely indication for the future.

B. Market Growth Rate – A higher market growth rate means more earnings and
often profits. On the other hand, it also means a higher consumption of cash as
investment to stimulate future growth. This investment is made into those
products which show a good potential for continued growth and success and are
expected to provide a return on investment. This matrix assumes that a higher
growth rate is an indicator of accompanying demands for investment. The market
growth rate provides more information about the brand position than just the cash
flow and is a good indicator of the strength of the market and its future potential
as well as attractiveness to more competitors.

1.3.Benefits of the BCG-Matrix:

 The BCG-Matrix is helpful for managers to evaluate the balance in a company’s portfolio
which comprises of products which can be classified as Stars, Cash Cows, Question
Marks and Dogs.
 BCG-Matrix is applicable to large companies that seek volume and experience effects.
 The model is simple and easy to understand.
 It provides a base for management to decide and prepare for future actions.
 If a company is able to use the experience curve to its advantage, it should be able to
manufacture and sell new products at a price that is low enough to get early market share
leadership. Once it becomes a star, it is destined to be profitable.

1.4.Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units
and makes it possible to compare many business units at a glance. But BCG Matrix is not free
from limitations, such as-

5
1. BCG matrix classifies businesses as low and high, but generally businesses can be
medium also. Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also
involved with high market share.
4. Growth rate and relative market share are not the only indicators of profitability. This
model ignores and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can
earn even more than cash cows sometimes.
6. This four-celled approach is considered to be too simplistic.

1.5. Assumptions
1. This matrix assumes that a larger market share in a growth market leads to profitability.
An effort to obtain a large market share in a slowly growing market requires too much
cash.

2. The higher the growth rate, the easier to gain market share.

3. Because of the presence of an experience effect, a high relative market share implies a
competitive advantage in terms of costs compared to the competition and vice versa.
As a consequence of this first hypothesis, the most powerful competitor will have a
competitive advantage in terms of profitability and thus generate more cash-flows.

4. Being positioned in a growing market implies an increased need for liquid funds to
finance this growth and vice versa.
Here we refer to the Product Lifecycle concept to point up the fact that a successful
company should allocate its activities accordingly to the Lifecycle phase to maintain
equilibrium between growth potential and profitability potential.

6
1.6. Components Of BCG (In short)

1.6.1.DOG

a. It has a small market share in a mature industry.


b. A dog may not require substantial cash because dogs have low market share and a
low growth rate and thus neither generate nor consume a large amount of cash.

1.6.2.QUESTION MARK (Problem Child)

a. It has a small market share in a high growth market.


b. Question marks are growing rapidly and thus consume large amounts of cash, but
because they have low market shares they do not generate much cash.
c. It has the potential to gain market share and become a star, and eventually a cash
cow when the market growth slows.

1.6.3.STAR

a. It has a large market share in a fast growing industry.


b. Stars generate large amounts of cash because of their strong relative market share,
but also consume large amounts of cash because of their high growth rate.

1.6.4. CASH COW

a. It has a large market share in a mature, slow growing industry.


b. As leaders in a mature market, they exhibit a return on assets that is greater than
the market growth rate, and thus generate more cash than they consume.
c. Such business units should be "milked", extracting the profits and investing as
little cash as possible.

7
2.GE McKinsey Matrix
2.1.Definitions
1. GE-McKinsey nine-box matrix is a strategy tool that offers a systematic approach for the
multi business corporation to prioritize its investments among its business units.
2. GE-McKinsey is a framework that evaluates business portfolio, provides further strategic
implications and helps to prioritize the investment needed for each business unit (BU).

2.2.What is GE McKinsey matrix?

 The GE McKinsey matrix is a nine-box matrix which is used as a strategy tool. It helps
multi-business corporations evaluate business portfolios and prioritize investments
among different business units in a systematic manner.
 This technique is used in brand marketing and product management. The analysis helps
companies decide what products need to be added to a product portfolio as well as what
other opportunities should continue to receive investments. Though similar to the BCG
matrix, the GE version is a lot more complex. The analysis begins as a two-dimensional
portfolio matrix but the dimensions are multifactorial with nine industry attractiveness
measures and twelve business strength measures.

2.3. Understanding the Tool


 In the business world, much like anywhere else, the problem of resource scarcity is
affecting the decisions the companies make. With limited resources, but many
opportunities of using them, the businesses need to choose how to use their cash best.
The fight for investments takes place in every level of the company: between teams,
functional departments, divisions or business units. The question of where and how much
to invest is an ever going headache for those who allocate the resources.
 How does this affect the diversified businesses? Multi business companies manage
complex business portfolios, often, with as much as 50, 60 or 100 products and services.
The products or business units differ in what they do, how well they perform or in their

8
future prospects. This makes it very hard to make a decision in which products the
company should invest. At least, it was hard until the BCG matrix and its improved
version GE-McKinsey matrix came to help. These tools solved the problem by
comparing the business units and assigning them to the groups that are worth investing in
or the groups that should be harvested or divested.
 In 1970s, General Electric was managing a huge and complex portfolio of unrelated
products and was unsatisfied about the returns from its investments in the products. At
the time, companies usually relied on projections of future cash flows, future market
growth or some other future projections to make investment decisions, which was an
unreliable method to allocate the resources. Therefore, GE consulted the McKinsey &
Company and as a result the nine-box framework was designed. The nine-box matrix
plots the BUs on its 9 cells that indicate whether the company should invest in a product,
harvest/divest it or do a further research on the product and invest in it if there’re still
some resources left. The BUs are evaluated on two axes: industry attractiveness and a
competitive strength of a unit.

Figure 2: GE Matrix

Before you can plot anything on the grid however first you need to decide how you will
determine both industry attractiveness and business unit strength.

9
2.4.Industry Attractiveness
Factors you could choose to base this on include:

2.4.1.Market Factors

 Market size
 Market growth

2.4.2.Pestel Factors

 Political
 Economical
 Social
 Technological
 Environmental
 Legal

2.4.3.Porters Five Forces

 Competitive rivalry
 Buyer power
 Supplier power
 Threat of new entrants
 Threat of substitution

2.5.Business Unit Strength


Factors to determine how strong a unit is compared to others in its industry include:

 Market share
 Growth in market share
 Brand equity
 Profit margins compared to competition
 Distribution channel process

10
2.6.Advantages of GE Matrix
 Helps to prioritize the limited resources in order to achieve the best returns.
 Managers become more aware of how their products or business units perform.
 It’s more sophisticated business portfolio framework than the BCG matrix.
 Identifies the strategic steps the company needs to make to improve the performance
of its business portfolio.

2.7.Disadvantages of GE Matrix
 Requires a consultant or a highly experienced person to determine industry’s
attractiveness and business unit strength as accurately as possible.
 It is costly to conduct.
 It doesn’t take into account the synergies that could exist between two or more business
units.

2.8.Investment Implications
 Invest/Grow Box: Companies should invest into the business units that fall into these
boxes as they promise the highest returns in the future. These business units will require a
lot of cash because they’ll be operating in growing industries and will have to maintain or
grow their market share. It is essential to provide as much resources as possible for BUs
so there would be no constraints for them to grow. The investments should be provided
for R&D, advertising, acquisitions and to increase the production capacity to meet the
demand in the future.
 Selectivity/Earnings Box: You should invest into these BUs only if you have the money
left over the investments in invest/grow business units group and if you believe that BUs
will generate cash in the future. These business units are often considered last as there’s a
lot of uncertainty with them. The general rule should be to invest in business units which
operate in huge markets and there are not many dominant players in the market, so the
investments would help to easily win larger market share.
 Harvest/Divest Box: The business units that are operating in unattractive industries,
don’t have sustainable competitive advantages or are incapable of achieving it and are

11
performing relatively poorly fall into harvest/divest boxes. What should companies do
with these business units?

First, if the business unit generates surplus cash, companies should treat them the same as the
business units that fall into ‘cash cows’ box in the BCG matrix. This means that the
companies should invest into these business units just enough to keep them operating and
collect all the cash generated by it. In other words, its worth to invest into such business as
long as investments into it don’t exceed the cash generated from it.

Second, the business units that only make losses should be divested. If that’s impossible and
there’s no way to turn the losses into profits, the company should liquidate the business unit.

2.9.Comparison with the BCG Matrix


When compared to the BCG matrix consisting of four cells, the GE matrix is more complex with
its nine cells. This means it not only takes longer to construct, but also to implement. The BCG
matrix is a lot simpler and the factors needed to construct it are accessed more easily and
quickly. It takes into account a wide range of factors when determining market attractiveness and
business strengths, which is replaced by market share and market growth in the BCG matrix.
Also, where factors are classified in the G.E matrix as high, medium and low, those in the BCG
matrix are divided between high and low. Moreover, the G.E matrix overcomes many of the
limitations and constraints of the BCG matrix.

12
3.McKinsey 7’s Model
3.1.Definition
A model of organizational effectiveness that postulates that there are seven internal factors of an
organization that need to be aligned and reinforced in order for it to be successful. The 7S Model
was developed at McKinsey & Co. consulting firm in the early 1980s by consultants Tom Peters
and Robert Waterman, authors of the management bestseller "In Search of Excellence."
McKinsey 7s model is a tool that analyzes firm’s organizational design by looking at 7 key
internal elements: strategy, structure, systems, shared values, style, staff and skills, in order to
identify if they are effectively aligned and allow organization to achieve its objectives.

3.2.Understanding the tool


McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert
Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the
introduction, the model has been widely used by academics and practitioners and remains one of
the most popular strategic planning tools. It sought to present an emphasis on human resources
(Soft S), rather than the traditional mass production tangibles of capital, infrastructure and
equipment, as a key to higher organizational performance. The goal of the model was to show
how 7 elements of the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared

13
values, can be aligned together to achieve effectiveness in a company. The key point of the
model is that all the seven areas are interconnected and a change in one area requires change in
the rest of a firm for it to function effectively.

Below you can find the McKinsey model, which represents the connections between seven areas
and divides them into ‘Soft Ss’ and ‘Hard Ss’’. The shape of the model emphasizes
interconnectedness of the elements.

The image shows McKinsey 7s model, where 7 organization elements are interconnected with
each other.

The model can be applied to many situations and is a valuable tool when organizational design is
at question. The most common uses of the framework are:

 To facilitate organizational change.


 To help implement new strategy.
 To identify how each area may change in a future.
 To facilitate the merger of organizations.

3.3. McKinsey 7s Factors


In McKinsey model, the seven areas of organization are divided into the ‘soft’ and ‘hard’ areas.
Strategy, structure and systems are hard elements that are much easier to identify and manage
when compared to soft elements. On the other hand, soft areas, although harder to manage, are
the foundation of the organization and are more likely to create the sustained competitive
advantage.

Figure 3: 7-S Factors

Hard “S” Soft “S”


Strategy Style
Structure Staff
Systems Skills
Shared Values

14
"Hard" elements are easier to define or identify and management can directly
influence them: These are strategy statements; organization charts and
reporting lines; and formal processes and IT systems.

"Soft" elements, on the other hand, can be more difficult to describe, and are
less tangible and more influenced by culture. However, these soft elements
are as important as the hard elements if the organization is going to be
successful.

3.3.1.Strategy

It is a plan developed by a firm to achieve sustained competitive advantage and successfully


compete in the market. What does a well-aligned strategy mean in 7s McKinsey model? In
general, a sound strategy is the one that’s clearly articulated, is long-term, helps to achieve
competitive advantage and is reinforced by strong vision, mission and values. But it’s hard to tell
if such strategy is well-aligned with other elements when analyzed alone. So the key in 7s model
is not to look at your company to find the great strategy, structure, systems and etc. but to look if
its aligned with other elements. For example, short-term strategy is usually a poor choice for a
company but if its aligned with other 6 elements, then it may provide strong results.

3.3.2.Structure

It represents the way business divisions and units are organized and include the information of
who is accountable to whom. In other words, structure is the organizational chart of the firm. It is
also one of the most visible and easy to change elements of the framework.

3.3.3.Systems

Systems are the processes and procedures of the company, which reveal business’ daily activities
and how decisions are made. Systems are the area of the firm that determines how business is
done and it should be the main focus for managers during organizational change.

15
3.3.4.Skills

These are the abilities that firm’s employees perform very well. They also include capabilities
and competences. During organizational change, the question often arises of what skills the
company will really need to reinforce its new strategy or new structure.

3.3.5.Staff

Staff element is concerned with what type and how many employees an organization will need
and how they will be recruited, trained, motivated and rewarded.

3.3.6.Style

Style represents the way the company is managed by top-level managers, how they interact, what
actions do they take and their symbolic value. In other words, it is the management style of
company’s leaders.

3.3.7.Shared Values

Shared values are at the core of McKinsey 7s model. They are the norms and standards that
guide employee behavior and company actions and thus, are the foundation of every
organization.

Placing shared values in the middle of the model emphasizes that these values are central to the
development of all the other critical elements. The company's structure, strategy, systems, style,
staff and skills all stem from why the organization was originally created, and what it stands for.
The original vision of the company was formed from the values of the creators. As the values
change, so do all the other elements.

16
Also, the first version of this model, published in 1982, classified “systems” as “soft”. Since
1982, very many processes in very many organizations have been meticulously documented or
automated, making them relatively easy to analyze and change. They are therefore shown above
as “hard”.

3.4.How to Use the Model


The model is based on the theory that, for an organization to perform well, these seven elements
need to be aligned and mutually reinforcing. So, the model can be used to help identify what
needs to be realigned to improve performance, or to maintain alignment (and performance)
during other types of change.

Whatever the type of change – restructuring, new processes, organizational merger, new systems,
change of leadership, and so on – the model can be used to understand how the organizational
elements are interrelated, and so ensure that the wider impact of changes made in one area is
taken into consideration.

3.5.Application of 7S
You can use the 7-S model to help analyze the current situation (Point A), a proposed future
situation (Point B) and to identify gaps and inconsistencies between them. It's then a question of
adjusting and tuning the elements of the 7-S model to ensure that your organization works
effectively and well once you reach the desired endpoint.

Sounds simple? Well, of course not: Changing your organization probably will not be simple at
all! Whole books and methodologies are dedicated to analyzing organizational strategy,
improving performance and managing change. The 7-S model is a good framework to help you
ask the right questions – but it won't give you all the answers. For that you'll need to bring
together the right knowledge, skills and experience.

When it comes to asking the right questions, we've developed a checklist and a matrix to keep
track of how the seven elements align with each other. Supplement these with your own
questions, based on your organization's specific circumstances and accumulated wisdom.

17
3.6. McKinsey 7-S Checklist Questions
Here are some of the questions that you'll need to explore to help you understand your situation
in terms of the 7-S framework. Use them to analyze your current (Point A) situation first, and
then repeat the exercise for your proposed situation (Point B).

Strategy

a. What is our strategy?


b. How do we intend to achieve our objectives?
c. How do we deal with competitive pressure?
d. How are changes in customer demands dealt with?
e. How is strategy adjusted for environmental issues?

Structure

a. How is the company/team divided?


b. What is the hierarchy?
c. How do the various departments coordinate activities?
d. How do the team members organize and align themselves?
e. Is decision making and controlling centralized or decentralized? Is this as it should be,
given what we're doing?
f. Where are the lines of communication? Explicit and implicit?

Systems

a. What are the main systems that run the organization? Consider financial and HR systems
as well as communications and document storage.
b. Where are the controls and how are they monitored and evaluated?
c. What internal rules and processes does the team use to keep on track?

Shared Values:
a. What are the core values?
b. What is the corporate/team culture?
c. How strong are the values?
d. What are the fundamental values that the company/team was built on?
18
Style
a. How participative is the management/leadership style?
b. How effective is that leadership?
c. Do employees/team members tend to be competitive or cooperative?
d. Are there real teams functioning within the organization or are they just nominal groups?

Staff
a. What positions or specializations are represented within the team?
b. What positions need to be filled?
c. Are there gaps in required competencies?

Skills
a. What are the strongest skills represented within the company/team?
b. Are there any skills gaps?
c. What is the company/team known for doing well?
d. Do the current employees/team members have the ability to do the job?
e. How are skills monitored and assessed?

19