Bcg Matrix Term Paper

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BCG Matrix

According to the BCG Matrix, the electronics category is a question mark characterized by low market share, but potential high growth. In this instance, a decision must be made to invest heavily, sell off or invest nothing and generate whatever cash is possible (BCG Matrix). Appliances, on the other hand, are cash cows enjoying high market share, but little growth. Because growth is low, investments should be kept to a minimum with profit maximization in mind. Portfolio planning methods such as the BCG Matrix are intended as guidelines to help managers overcome tendencies to use unstructured judgment, which is prone to distortion by power or emotional factors that lead away from rational profit maximization (Brodie and Armstrong, 2003). At the same time, these authors caution that there's little evidence exists to support a causal relationship between market growth and profits, or between market share and profitability

These comments are not intended to dismiss the BCG Matrix as irrelevant, but to emphasize that every planning method has it's limitations as this paper will discuss, indicating the need for a more diversified approach to more fully incorporate broader considerations.

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The BCG Matrix focuses on market growth for industry attractiveness and market share for competitive advantage even though there are many other factors for these success factors. For example, the Five Competitive Forces developed by Porter advises a detailed analysis of the entry of competitors, threat of substitutes, bargaining power of suppliers, and rivalry among the existing players to determine industry attractiveness (Five competitive forces model Porter). And, the GE/McKinsey suggests a far wider range of attributes for competitive advantage than market share such as strength of assets and competencies, relative brand strength, customer loyalty, relative cost position and profit margins, distribution strength and production capacity, innovation, quality, access to financial and investment resources, and management strength (McKinsey matrix -- GE matrix). Clearly, this company needs to explore many….....

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