1. Prerequisites. In order to conduct a complete BCG-analysis we need the market growth rate and market share of each SBU as well as market shares of their main competitors to calculate relative market share. Since in the assignment we have only market shares of the business units and the rates of growth, we still need the respective market shares of competitors to present a relevant BCG-matrix. Failing such information, we base our portfolio analysis on assumptions and provide several options for different situations.
2. BCG-analysis. Before making any conclusions regarding the company portfolio and strategy, it is necessary to build a BCG-matrix to find out which business units are strong and which ones are weak points.
Now, let’s place our SBUs on the matrix.
SBU1: market share 55%, market growth rate 5%. As this unit covers more than 50% of the market, its relative market share is definitely higher than 1 and it’s a leader on the market. However, its growth rate is lower than our average (10-12%), so we place it on the quadrant #4 – Cash cows. It means this unit generates more cash than it consumes. It provides the cash to turn question marks into market leaders, to cover the administrative costs of the company and to fund R&D. (What Is a BCG Matrix?)
SBU2: market share 20%, market growth rate 15%. Since we have no information about the main competitor or competitors, there are the 2 possible options. As SBU’s market growth rate is rather high, we definitely consider it either as Question Mark (option 1) or as Star (option 2), depending on its relative market share. Taking into account that a market of wheeled products tend to be monopolistic, our SBU2 is likely to have a direct competitor with its market share being far more than 20%, and the option “Question Mark” is more likely. However, there is a slight possibility of an oligopoly market, and then SBU2 may be defined as a Star or close to the Star.
SBU3: market share 5%, market growth rate 3%. In this case both market growth rate and market share are low, since the market of outdoor products is not a market of perfect competition, there are definitely competitors with higher market shares. SBU3 (as seen from the picture) belongs to Dogs.
SBU4: market share 8%, market growth rate 15%. Considering the relatively high market growth rate, SBU4 belongs either to Question Marks or to Stars. However, since the market of fitness products is monopolistic, SBU4’s relative market share is less than 1. That’s why we consider it as Question Mark.
Now, when all the units of the portfolio are determined, it is possible to define a strategy for each one:
SBU1: generates more ROI than other product categories and needs investments to sustain (How to use the BCG Matrix - Smart Insights Digital Marketing, 2013) and to prevent market share loss.
SBU2: since that unit has a rather high market share, it’s worth investing in and likely to turn into a Star in the future, if it is not such now.
SBU3: the best option in our case is to remove that unit from our portfolio, since there are hardly any prospective of development.
SBU4: it’s the most controversial part of our portfolio. The market share is not high and the decision about investment cannot be made without any further research. To propose a clear strategy, the information regarding the competitors is needed so as to find out if it is possible to turn into Star. (Strategic Management Insight)
Works Cited
What Is a BCG Matrix? (n.d.). Retrieved June 30, 2016, from http://www.businessnewsdaily.com/5693-bcg-matrix.html
How to use the BCG Matrix - Smart Insights Digital Marketing. (2013). Retrieved June 30, 2016, from http://www.smartinsights.com/marketing-planning/marketing-models/use-bcg-matrix/
Strategic Management Insight. (n.d.). Retrieved June 30, 2016, from https://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html
BCG Matrix. (n.d.). Retrieved June 30, 2016, from http://www.valuebasedmanagement.net/methods_bcgmatrix.html
