BCG Matrix (With Real World Examples) | From A Business Professor — Transcript

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1. 0:00hello everyone welcome to business
2. 0:02school 101 for a company with a big
3. 0:04portfolio it's important to assess its
4. 0:07product lines regularly to see which
5. 0:09product is profitable which is making
6. 0:11losses and which ones need some work
7. 0:13this practice helps the company to
8. 0:15allocate its resources accordingly to
9. 0:17function more efficiently while many
10. 0:19practices and tools are available to the
11. 0:21company to accomplish this Mission the
12. 0:23BCG Matrix developed by the Boston
13. 0:26Consulting Group is considered a gold
14. 0:28standard for finding the cash cap the
15. 0:30Stars the question marks and the dogs at
16. 0:33the height of its success the BCG Matrix
17. 0:36was used by about half of all Fortune
18. 0:38500 companies so what is the Matrix are
19. 0:41there some real world examples how to
20. 0:43use it in this video I will discuss
21. 0:45these questions with
22. 0:48you section one origin and assumptions
23. 0:52in the 1970s Bruce Henderson founder of
24. 0:55the Boston Consulting Group came up with
25. 0:57the BCG Matrix also called as growth
26. 1:00share Matrix which would look at a
27. 1:01successful business product portfolio
28. 1:04based on potential growth in market
29. 1:05shares according to the product
30. 1:07portfolio Theory it's fundamental to
31. 1:09look at cash flows to build up a
32. 1:11successful portfolio and this is based
33. 1:13on four primary assumptions number one
34. 1:16high market shares bring High margins
35. 1:19and cash flows number two growth
36. 1:21requires cash to be maintained number
37. 1:24three High market share will be either
38. 1:26earned or bought number four no product
39. 1:29Market Market can grow
40. 1:32forever section two four quadrants the
41. 1:36BCG Matrix plots a company's offerings
42. 1:38in a 2X two Matrix with the y- AIS
43. 1:41representing the rate of market growth
44. 1:43and the x-axis representing market share
45. 1:46then it divided products into that four
46. 1:47quadrants Stars cash cows question marks
47. 1:51and dogs let's discuss them individually
48. 1:54number one stars stars are high share
49. 1:57high growth products and they are highly
50. 1:59competitive in the category they may
51. 2:02have been expensive to develop but are
52. 2:03worth spending money on for promotion
53. 2:06given the long extent of their product
54. 2:07life cycle if successful a star will
55. 2:10become a cash cow when the category
56. 2:12matures however not all stars become
57. 2:15cash flows and continuously changing
58. 2:17Industries when new technologies replace
59. 2:19old ones a star could also become a dog
60. 2:23number two cash cows cash cows are
61. 2:26products with high market share and slow
62. 2:28growth they generate profits by
63. 2:30investing as little cash as possible in
64. 2:32lowcost support and need to be managed
65. 2:34for continued profits or cash flow cash
66. 2:37cows need to maintain a strong Market
67. 2:39position and defend their market share
68. 2:42the company should take advantage of
69. 2:43sales volume and leverage the size of
70. 2:45its operations profits from cash cows
71. 2:48can also be used to support other
72. 2:50products number three question marks
73. 2:53question marks are low market share and
74. 2:55high growth products most businesses
75. 2:57start as question marks these require
76. 3:00huge Investments to capture or protect
77. 3:02market share question marks have the
78. 3:04potential to become stars and eventually
79. 3:06cash cows but can also become dogs
80. 3:09number four dogs dogs are products with
81. 3:12low market share and slow growth unless
82. 3:15a dog has some other strategic aim it
83. 3:17should be liquidated if there are fewer
84. 3:19prospects for it to gain market share
85. 3:21normally these products are situated at
86. 3:23a declining stage of the product life
87. 3:25cycle the company should get rid of all
88. 3:28nonv value added activities in features
89. 3:30it must then reposition the offering to
90. 3:32generate positive cash flow or sell this
91. 3:36business section three real world
92. 3:39examples example one Pepsi Pepsi is best
93. 3:43known for its soft drink Brands but it
94. 3:45also has Diversified interests in
95. 3:47breakfast foods snacks sports drinks
96. 3:50water iced tea and various coffee- based
97. 3:52beverages let's look at some of these
98. 3:54under the BCG Matrix first stars in
99. 3:58North America gator holds an impressive
100. 4:0167.7% of the sports drinks Market where
101. 4:04it has been a Mainstay for around half a
102. 4:06century mortar intelligence predicts the
103. 4:08global sports drink Market to grow at a
104. 4:10compound annual growth rate of 4.5% in
105. 4:13the next 5 years this increase is mainly
106. 4:16driven by more awareness of the benefits
107. 4:18of sports drinks and their ability to
108. 4:20act as a convenient food or nutrient
109. 4:22supplement second cash cows one Cash Cow
110. 4:25for PepsiCo is snack brand Fredo with
111. 4:28nearly 60% Market market share in the
112. 4:30United States and in 2020 $4.8 billion
113. 4:34in sales the Brand's range of convenient
114. 4:36and savory snacks is a staple of
115. 4:38American pantries and is thus unlikely
116. 4:40to decline in popularity anytime soon
117. 4:43question marks when Diet Pepsi was
118. 4:45launched in 1964 it became the first
119. 4:48diet cola to be distributed around the
120. 4:50US it enjoyed first mover Advantage
121. 4:53until Diet Coke was released in 1982
122. 4:56despite renewed interest in healthier
123. 4:57low calorie drinks today Pepsi's share
124. 5:00of the Core US soft drink Market has
125. 5:02declined from 6.1% in 2004 to 3.8% in
126. 5:0720121 fourth dogs consumer health Trends
127. 5:11suggest that all sweetened Cola
128. 5:13beverages including Pepsi will move to
129. 5:15the dog quadrant at some point shortly
130. 5:17however this cannot be predicted with
131. 5:19absolute certainty Pepsi's failed
132. 5:21attempts to move with the times have led
133. 5:23to some of its most notable failed
134. 5:25Brands one of these was crystal Pepsi a
135. 5:28colorless caffeine-free alternative to
136. 5:30Pepsi which was removed from shelves
137. 5:31after just 12 months in
138. 5:331993 real world example 2 apple as we
139. 5:38know Apple's products include iPhone Mac
140. 5:41iPad airpods Apple TV Apple watch
141. 5:44homepod iPod touch and accessories so
142. 5:47let's take a look at Apple's BCG Matrix
143. 5:50first stars for Apple the iPhones are
144. 5:53undoubtedly the stars of the company
145. 5:55known for their design and Technology
146. 5:57Apple's iPhones have a loyal fan base
147. 5:59thanks to which the company manages to
148. 6:01leave the competition behind in the
149. 6:03market second cash cows for Apple
150. 6:06products fall under the cash cow
151. 6:08category in Apple's BCG Matrix those
152. 6:11products are iTunes mcbooks iPads and
153. 6:13apple watches however please keep in
154. 6:16mind that as the computer industry
155. 6:18slowly becomes portable and mobile the
156. 6:20need for laptops and desktops also
157. 6:22decreases third question mark for Apple
158. 6:25the Apple TV and apple airpods can be
159. 6:28considered as question marks stiff
160. 6:30competition from Big Brands and other
161. 6:31smaller players has added a lot more
162. 6:34pressure on the company to gain market
163. 6:35share fourth dogs considering the
164. 6:39performance of all the products that
165. 6:40apple offers the declining market demand
166. 6:42and high innovation in the music sharing
167. 6:44industry have made Apple iPods fall into
168. 6:46the dogs quadrant of the BCG
169. 6:50Matrix section four how to use the BCG
170. 6:54Matrix the BCG Matrix can help companies
171. 6:57identify which products they should
172. 6:59prioritize and which need to be cut
173. 7:01altogether here are four strategies to
174. 7:03use the BCG Matrix number one if your
175. 7:07goal is to focus on Innovation and
176. 7:08expansion you should invest in stars and
177. 7:11question marks because of their high
178. 7:12growth potential sometimes you may be
179. 7:14able to push a question mark into a star
180. 7:17and later a Cash Cow by investing more
181. 7:19in it number two for cash cows if you
182. 7:22can't invest more keep it in the same
183. 7:24quadrant and leave it alone because it
184. 7:26is a well-established product that takes
185. 7:28less effort to make maintain number
186. 7:30three for dogs due to their low market
187. 7:33share and low growth potential you
188. 7:35should divest the amount of money
189. 7:36invested and apply it to other products
190. 7:39number four under certain scenarios a
191. 7:42product that was a question mark could
192. 7:43quickly turn into a dog so you should be
193. 7:45ready to walk away if the stakes get too
194. 7:47high please keep in mind that because
195. 7:50consumer preferences are constantly
196. 7:51changing it's difficult to predict the
197. 7:54long-term growth of any product that's
198. 7:56why you should regularly revise and
199. 7:58update your BCG Matrix as market
200. 8:00conditions change at the end of the day
201. 8:02the goal isn't to succeed in any one
202. 8:04area it's to create a diversified
203. 8:06portfolio you need products in every
204. 8:09quadrant of your BCG Matrix to keep a
205. 8:11healthy cash flow and offer products
206. 8:13that can secure your company's future
207. 8:15all right that's all for today's topic
208. 8:18if you have any questions regarding this
209. 8:20video please leave your thoughts in a
210. 8:22comment below I hope that you guys have
211. 8:24enjoyed this video and if you did make
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214. 8:30watching and I will see you next time