Enterprises that produce goods or provide services in a large assortment, are forced to conduct a comparative analysis of the company's business units to make a decision on the allocation of investment resources. The maximum financial investments are received by the priority area of the company's activity, which brings the maximum profit. The tool for managing the product range is the BCG matrix, an example of the construction and analysis of which helps marketers make decisions about the development or liquidation of the company's business units.
The concept and essence of the BCG matrix
Formation of long-term plans of the company, the correct distribution of financial resources between the components of the company's strategic portfolio occurs through the use of a tool created by the Boston Consulting Group. Hence the nameinstrument - BCG matrix. An example of building a system is based on the dependence of the relative market share on its growth rate.
The competitiveness of a product is expressed as an indicator of relative market share and is plotted along the x-axis. An indicator whose value is greater than one is considered high.
Attractiveness, maturity of the market is characterized by the value of its growth rate. Data for this parameter is plotted on the matrix along the Y axis.
After calculating the relative share and growth rate of the market for each good that the firm produces, the data is transferred to a system called the BCG matrix (an example of the system will be discussed below).
Matrix quadrants
When product groups are distributed according to the BCG model, each assortment unit falls into one of the four quadrants of the matrix. Each quadrant has its own name and recommendations for decision making. Below is a table consisting of the same categories as the BCG matrix, an example of the construction and analysis of which cannot be done without knowing the features of each zone.
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Wild Cats
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Stars
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Dogs
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Cash Cows
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Objects of analysis
An example of the construction and analysis of the BCG matrix is impossible without defining the goods that can be considered in the projection of this system.
- Lines of business that are unrelated. These can be: hairdressing services and the production of electric kettles.
- Assortment groups of the firm sold in one market. For example, selling apartments, renting apartments, selling houses, etc. That is, the real estate market is being considered.
- Goods classified in one group. For example, the production of utensils made of glass, metal or ceramics.
BCG matrix: an example of construction and analysis in Excel
To determine the life cycle of a product and strategic planning of the marketing activities of an enterprise, an example with fictitious data will be considered to understand the topic of the article.
The first step is to collect and tabulate data on the analyzed goods. This operation is simple, you need to create a table in"Excel" and enter data on the enterprise into it.
The second step is the calculation of market indicators: growth rate and relative share. To do this, you will need to enter formulas for automatic calculation in the cells of the created table:
- In cell E3, which will contain the value of the market growth rate, this formula looks like this: \u003d C3 / B3. If you get a lot of decimal places, then you need to reduce the bit depth to two.
- The procedure is the same for each item.
- In cell F9, which is responsible for relative market share, the formula looks like this:=C3/D3.
The result is such a filled table.
According to the table, sales of the first product fell by 37% in 2015, while sales of product 3 increased by 49%. Competitiveness or relative market share for the first product category is 47% lower than that of competitors, but higher for the third and fourth products by 33% and 26% respectively.
Graphic display
Based on the table data, a BCG matrix is constructed, an example of construction in Excel of which is based on the choice of a Bubble chart.
After selecting the type of chart, an empty field appears, by pressing the right mouse button on which you need to call up a window for selecting data to fill in the future matrix.
After adding a row, its data is filled. Each row is a product of the enterprise. For the first item, the data will be as follows:
- Row name - cell A3.
- X-axis - cell F3.
- Y-axis - cell E3.
- Bubble size - cell C3.
This is how the BCG matrix is created (for all four goods), the example of constructing other goods is similar to the first one.
Changing the format of the axes
When all products are graphically displayed on the diagram, it is necessary to break it into quadrants. This distinction is the X, Y axes. You only need to change the automatic settings of the axes. By clicking on the vertical scale, the “Format” tab is selected and the “Format Selection” window is called up on the left side of the panel.
Changing the vertical axis:
- The minimum value is assumed to be "0".
- The maximum value is the average ODR times 2: (0.53+0.56+1.33+1.26)/4=0.92; 0, 922=1, 84.
- Main and intermediate divisions are the average of ODR.
- Intersection with the X-axis - average ODR.
Changing the horizontal axis:
- The minimum value is assumed to be "0".
- The maximum value is "2".
- The remaining parameters are "1".
The resulting diagram is the BCG matrix. An example of building and analyzing such a model will give an answer about the priority development of the company's assortment units.
Signatures
To complete the construction of the BCG system, it remains to create labels for the axes and quadrants. It is necessary to select the diagram and go to the program section"Layout". Using the "Inscription" icon, the cursor is moved to the first quadrant and its name is written. This procedure is repeated in the next three zones of the matrix.
To create the name of the chart, which is located in the center of the BCG model, the pictogram of the same name is selected, following from the "Inscription".
Following from left to right on the Excel 2010 toolbar of the "Layout" section, similarly to the previous labels, axis labels are created. As a result, the BCG matrix, an example of construction in Excel of which was considered, has the following form:
Analysis of assortment units
Plotting market share versus growth rate is half the solution to the strategic marketing problem. The crucial point is the correct interpretation of the position of goods on the market and the choice of further actions (strategies) for their development or liquidation. BCG Matrix Analysis Example:
Product 1, located in the area of low market growth and relative share. This commodity unit has already passed its life cycle and it does not bring profit to the company. In a real situation, it would be necessary to conduct a detailed analysis of such goods and determine the conditions for their release in the absence of profit from their sale. Theoretically, it is better to exclude this commodity group and direct the freed up resources to the development of promising benefits.
Product 2 is in a growing market but requires investment to increase competitiveness. Is a promising product.
Item 3is at the peak of its life cycle. This type of assortment unit has high ODR and market growth rates. An increase in investment is required so that in the future the business unit of the company that produces this product brings a stable income.
Product 4 is a profit generator. It is recommended that the funds received by the company from the sale of this category of the assortment unit be directed to the development of goods No. 2, 3.
Strategies
An example of the construction and analysis of the BCG matrix helps to highlight the following four strategies.
- Increase in market share. Such a development plan is acceptable for products located in the Wild Cats zone, with the aim of moving them to the Stars quadrant.
- Maintaining market share. To get a stable income from Cash Cows, it is recommended to apply this strategy.
- Decreasing market share. Let's apply the plan to weak Cash Cows, Dogs and unpromising Wild Cats.
- Liquidation is a strategy for the Dogs and the hopeless Wildcats.
BCG matrix: an example of construction in a Word
The method of building a model in "Word" is more time-consuming and not entirely clear. An example will be considered according to the data that was used to build the matrix in Excel.
Product |
Revenue, cash |
Leading Competitor Sales, monetary units |
Estimates |
Market growth rate, % |
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2014 |
2015g |
Market growth rate |
Relative market share |
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| Item 1 | 521 | 330 | 625 | 0, 63 | 0, 53 | -37 |
| Item 2 | 650 | 900 | 1600 | 1, 38 | 0, 56 | 62 |
| Item 3 | 806 | 1200 | 901 | 1, 49 | 1, 33 | 51 |
| Item 4 | 1500 | 1050 | 836 | 0, 70 | 1, 26 | -30 |
The "Market growth rate" column appears, the values of which are calculated as follows: (1-growth rate data)100%.
Building a table with four rows and columns. The first column is combined into one cell and signed as "Market Growth Rate". In the remaining columns, you need to combine rows in pairs to get two large cells at the top of the table and two rows left at the bottom. As shown.
| Market growth rate | High (more than 10%) |
1 Item 1 |
2 Item 2 |
| Low (less than 10%) |
4 Item 4 |
3 Item 3 |
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| Low (less than 1) | High (greater than 1) | ||
| Relative market share | |||
The lowest line will contain the coordinate "Relative market share", above it - the values: less or more than 1. Turning to the table data (to its last two columns), the definition of goods by quadrants begins. For example, for the first product, ODR=0.53, which is less than one, it means that its location will be either in the first or in the fourth quadrant. The market growth rate is a negative value equal to -37%. Since the growth rate in the matrix is divided by a value of 10%, then product number 1 definitely falls into the fourth quadrant. The same distribution occurs with the remaining assortment units. The result should match the Excel chart.
BCG matrix: an example of construction and analysis determines the strategic positions of the company's assortment units and participates in making decisions about the allocation of enterprise resources.
