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BCG Growth-Share Matrix: Bruce Henderson

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BCG Growth-Share Matrix Introduction The BCG Matrix was evolved in the early 1970s by Bruce Henderson, founder of the Boston Consulting Group, to help corporations make investment and disinvestment decisions related to their business units or product portfolios. The matrix plots business units (or products) that form part of a corporation’s portfolio on a grid of four equal quadrants on the basis of their market growth and market share (which is why the BCG Matrix is also called the “Growth-Share” Matrix). The matrix categorises units as “stars,” “cash cows,” “dogs,” and “question marks,” depending on whether they deserve cash infusions or need to be closed down. Suggested image here: https://www.google.co.in/search?q=images+of+bcg+matrix&biw=1280&bih=689&tbm=isch&tbo=u&source=univ&sa=X&ei=VgqeVfKaD4uwuAS9voDoBg&ved=0CBwQsAQ#imgrc=pBDs3BceOtFkAM%3A …show more content…

The higher the market growth, the higher is the requirement of cash for capacity-building. It is on the basis of these assumptions that the categorisation of business units as stars, cash cows, dogs, and question marks was envisaged. A business unit’s position on the matrix indicates how much cash it generates and consumes. A corporation can find out the relative positions of all its business units under it from the matrix. Apart from assisting in decision-making on the allocation of funds among different business units, the BCG Matrix can help a corporation decide on earmarking funds for the development of its products. The matrix can also be used to calculate the relative market share and the market growth of a product line. It can also show the position of a business unit or product in its life cycle. Criticism of the matrix The BCG Matrix has lost some of its popularity following the development of other models, and drawn criticism for its basic assumption that a business unit with a higher market share will generate more cash. It has been pointed out that a unit that has a high market share needs to keep investing in itself to sustain this share and, therefore, may absorb cash instead of generating

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