BCG MATRIX in simple,growth rate,numerical calculation,relative market share,calculation

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BCG MATRIX

IF You look closely you will be able to understand a company has a wide range of products,take an example of ITC or TATA group they are dealing in fmcg sector,I.T services,hotels etc.Now every sector has a variety and range of products.for the convenience take example of tata,they are dealing in hotels (taj hotels).automobile(tata nano,jaguar land rover) fmcg (tata salt),airlines(vistara).
Before we begin with concept of bcg matrix we need to understand the product mix.the above picture has been taken from one of the source and for this we are going to take an example of Samsung.
Samsung deals in mobile phones,television,air conditions and refrigerators.now these all 4 categories are product line,and within that we have different kinds of mobile phones, refrigerators so they all are product line depth.and combination of product line+product line depth = product mix width.it might be that one product is growing and giving good revenue and other is not,and we need to understand where our product lies and same time we need to understand the status of the product ,whether we should invest more in that or not or whether we should divest .To get more clear picture we should understand the concept first. 
                     
BCG matrix talks and consider two factors market share and market growth.say you a have a mobile phone product and you sold 40 mobile phones now total sales was 100 in the whole market,now you will say i have 40 % of market share but it won't give you the clear picture with whom you are competing ,so say there is another company with product B and they sell 50 mobile phones and the third company sells 10 mobile phones.now in BCG matrix we consider relative market share and the calculation will be 40/50 i.e your market share/nearest largest competitor.so in general context there can only be one firm who can have market share of above one and majority would be less than one.Now interesting fact is that even relative market share can be calculated in two ways.one is the basis of units we sell and the other on the basis of your currency/rs /dollar. to understand this, classic example is apple ,well in terms of no units sold -  it was at the third position but in terms of value it is far ahead so for apple it will be best to take dollar value as basis.

Market growth : Now second factor is industry growth ,now in this we don't consider the product growth but instead we take what is the development of whole industry.This can be understood that that you are selling radios but demand of the radio is very low and growth too.Now may be you are market leader but growth but growth of the the industry is declining,now it wont be a great idea to invest a lot on the radio products.This is highly related to product maturity period and all.so now as we know both industry growth and market share lets jump to the concept of whole bcg matrix. this can be calculated as total no of units sold this year /total no of units sold last year .keep in mind we are not talking about one company but we are talking about the whole industry.say this year total mobile phones sold was 1100 and last year it was 1000 so growth rate is 10%. Again i would like to remind you i am not talking about mobile phone of one brand but i am talking about all mobile phones sold in the market.

Stars : These are those product which has high market share and high market growth rate.for this we qare taking an example of coca cola.thumps up and kinley are having having high growth rate and high market share hence they are stars.These products require lots of investment as industry is also growing and hence they give us revenue as well.

Cash cows : cash cows are those which has high relative market share but growth rate is less.this happens when your market share starts decreasing and hence products listed in stars shifts from stars to cash cows.of course they give revenue but growth of market is declining. e.g can be limca 

question marks: these are the products which have high market growth rate but there relative market share is low and hence the best strategy is to select some product and try to promote and invest into them so that they go to star category and rest of the products should be divested.

Dogs: These are the products which have less market share and less growth and hence they should be liquidated ,as they are not giving revenue and at the same time in near future they are a few chances to give high revenue.


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