How to Make a BCG Matrix Model (Boston Consultancy Group Matrix) Model?

In this article you will learn about:

What BCG Matrix (Boston Consultancy Group Matrix) Model used for?

Why Relative Market Share in BCG Matrix (Boston Consultancy Group Matrix)?

Why relative to the biggest competitor in the market?

What is the market growth rate in BCG Matrix Model?

What is the BCG Matrix (Boston Consultancy Group Matrix) Analysis Diagram?

How to Make a BCG Matrix Model (Boston Consultancy Group Matrix) Model?

What is the normal sequence of any product in the B.C.G. Matrix?

BCG Matrix; Boston Consultancy Group Matrix Model

is a matrix that classifies products according to their cash usage and cash generation, using market growth and relative market share to categorize them in the form of a box matrix.

The

Relative Market share

is the indicator of Cash Generation, which indicates the ability of your product to generate cash, while the market growth is indicator of Cash Usage; which is indicator of how much cash required investing in your product (product’s cash requirements).

What BCG Matrix (Boston Consultancy Group Matrix) Model used for?

The

BCG Matrix Model

can be used to forecast the market position of your products in the next five years from now, so it’s very helpful and effective tool.

Why Relative Market Share in BCG Matrix (Boston Consultancy Group Matrix)?

Because it reflect your product position in the market, so relative market share means your market share relatively to the biggest competitor in the market.

Why relative to the biggest competitor in the market?

Because it reflect your product’s market share from the best and biggest competitor market share, so we use the biggest competitor market share to be as standard for measuring your product performance or as

KPI; Key Performance Indicator

.

What is the market growth rate in BCG Matrix Model?

It’s the annual growth rate of the market (that you are promoting your product in) relative to the G.N.P. growth (Growth National Product).

What is the BCG Matrix (Boston Consultancy Group Matrix) Analysis Diagram?

The previous 2 diagrams are representing the

BCG Matrix

for analyzing and planning your product performance against the competitors.

Before I start to explain what the four boxes are shown above in the BCG Matrix, I am going to explain

how to calculate the relative market share in BCG Matrix Model Diagram

.

How to Make a BCG Matrix Model (Boston Consultancy Group Matrix) Model?

It’s the % of the market share of your product relative to the % of the market share of the biggest competitor in your market.

Example: if your product market share is 10% and the biggest competitor’s market share is 20%, then your relative market share is 10:20 which equal to 1:2, then we balance the equation again to make the competitor market share as 10%, so your relative market share will be 5:10 or 0.5:1.

Please note that the VERTICAL Axis in the B.C.G. matrix is representing the biggest competitor’s market share that you are comparing your product to. So it’s common to make the vertical axis as 1 which equal to 10% of competitor market share, then you are comparing your product relatively to this %, to be more than 1 or less than 1. I will explain this more in the examples.

What is the normal sequence of any product in the B.C.G. Matrix?

Any new product is a problem child or question mark (as market penetration strategy), then with effective marketing strategies and tactics it become star. As the Market become mature (stable market) then your product become a Cash Cow, and finally your product becomes a Dog (declining phase of the PLC; Product Life Cycle).