Business or Corporate Strategy Using The Bolton Group Consulting Matrix
The Bolton Consulting Group (BCG) matrix is a model which basically enables one to plan for strategies at each stage at which an individual product-market is perceived be in terms of market growth and the firm’s relative strength (market share).
Before going further,let’s look at the features of this BCG matrix.
The BCG matrix focuses on the following two variables and four quadrant/category/area:( see above picture)
TWO VARIABLES AND FOUR QUADRANT/CATEGORY/STAGE
The two variables are:
On the vertical scale:-
- Rate of growth of the product-market area which signifies the global indicator of the attractiveness of the market . This rate of growth measure the market attractiveness because of the opportunity that market growth gives for individual business expansion.
On the horizontal scale:-
- Market share in that area held by the firm relative to that of its competitor which summarizes the overall strength the firm in that product-market area relative to its competitor. Note that the relative market share possessed by a firm is not only a measure of the success of an individual business in competition with other sellers but also indicates the extent of likely benefits to the firm in terms of the increased profitability arising from the lower unit costs and enhanced market power associated with dominant market share.
The four quadrant/categories are( see above picture):
STAR | QUESTION MARK |
CASH COW | DOG |
Brief explanation of the characteristic of each quadrant:
Question mark stage
- Products in this category can enjoy a high rate of growth on the basis of the high market growth rate but the firm’s present market share is low.
- At this stage,the firm experiences a competitive disadvantage associated with low market share and a smaller scale of operations than its major competitors combined with the need for large cash injection if it is to keep pace with the overall market growth.
Star stage
- Products in this category can enjoy a high rate of growth on the basis of the high market growth rate and also the cost advantages associated with increased scale and growth
- At this stage,profitability is likely to be high,but at the same time cash flow requirements will also be great because of the high market growth rate.
Cash Cow stage
- As the product market itself reaches maturity or the plateau of the product,the life-cycle,Star products become Cash Cows.
- At this stage,profitability continue and because of the relative absence of new investment requirements cash flow should be strongly positive.
Dog stage
- Market areas in which the firm is not one of the leaders and in which the market as a whole is not expanding
- The firm here suffers from twin diadvantages of operating at a low level of output and likely to be at a cost disadvantage in comparison with the market leader,combined with minimal growth in the market.
[ Click here for Part 2 re:Strategies At Each Stage Of The Bolton Consulting Group Matrix (Part2) ]
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four,Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.Also author to another very popular free educational accounting cum finance blog:http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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