BCG's GROWTH-SHARE MATRIX
BCG’s Growth-Share Matrix
BCG’s Portfolio Analysis is based on the premise that majority
of the companies carry out multiple business activities in a number of
different product-market segments. Together these different businesses form the
Business Portfolio which can be characterised by two parameters:
- Company’s relative market share for the business, representing the firms competitive positions; and
- The overall growth rate of that business.
The BCG model proposes that for each business activity within
the corporate portfolio, a separate strategy must be developed depending on its
location in a two by-two portfolio matrix of high and low segments on each of
the above mentioned axes.
Relative Market Share is stressed on the
assumption that the relative competitive position of the company would
determine the rate at which the business generates cash. An organization with a
higher relative share of the market compared to its competitors will have
higher profit margins and therefore higher cash flows.
