This technique is particularly useful for multi-divisional or multiproduct companies. The divisions or products compromise the organisations “business portfolio”. The composition of the portfolio can be critical to the growth and success of the company.
The BCG matrix considers two variables, namely..
N market growth RATE
N relative market SHARE
The market growth rate is shown on the vertical (y) axis and is expressed as a %. The range is set somewhat arbitrarily. The overhead shows a range of 0 to 20% with division between low and high growth at 10% (the original work by B Headley “Strategy and the business portfolio”, Long Range Planning, Feb 1977 used these criteria).
Inflation and/or Gross National Product have some impact on the range and thus the vertical axis can be modified to represent an index where the dividing line between low and high growth is at 1.0. Industries expanding faster than inflation or GNP would show above the line and those growing at less than inflation or GNP would be classed as low growth and show below the line. The horizontal (x) axis shows relative market share.
The Essay on The Globe: Cracking the Next Growth Market: Africa
The article “The Globe: Cracking the Next Growth Market: Africa” talks about the growing awareness of significant business opportunities in many African countries in the next coming years. Ever since the 2010 FIFA World Cup took place in South Africa, economists and executives all agreed that Africa would be the next big emerging market. However, companies have been hesitating to enter this new ...
The share is calculated by reference to the largest competitor in the market. Again the range and division between high and low shares is arbitrary. The original work used a scale of 0.1, i.e. market leadership occurs when the relative market share exceeds 1.0. The BCG growth/share matrix is divided into four cells or quadrants, each of which represent a particular type of business. Divisions or products are represented by circles. The size of the circle reflects the relative significance of the division/product to group sales. A development of the matrix is to reflect the relative profit contribution of each division and this is shown as a piesegment within the circle.
