Friday, 29 April 2016

What segment of your business is performing well?


Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Hello readers, the Boston Consulting Group's  growth share matrix will be used to let you know what segment of your business is performing well, so what this matrix does is to compare the annual real rate of the market growth with its relative market share. An industry is said to be attractive when the rate of its market growth is high. The matrix is easy to use, so basically you look at the rate of the market growth of your product and you compare  it to the relative market share.

According to what I wrote above, if the rate of the market growth is high and the relative market share is low, then you can say the product is at its growth stage and you will just have to study the product to see if it can become a potential star. The income this product will be generating will be low. If the rate of the market growth is low and the relative market share is also low then it will be best to stop making the product as it will only be generating low and unstable income (if not losses).

However, if the rate of the market growth is low and the relative market share is high then it will, then you can refer to the product as a cash cow as it will generating high and stable income for the business. The business is the market leader in which the target market of the product. Thus, the product will be generating a lot of money, while requiring little capital to maintain its production. But if the market growth rate is high and the market share is also high then the product can be called a star, it will be generating a high and growing income for the business, however, the business will require a high amount of capital to maintain it, since its target market is still growing, as such they will be required to stay competitive.

This matrix has been criticized for its market definition, because a product can have a little market share in a bigger market but still have the leadership title when streamed line into a smaller market. For example, a restaurant can have 5% of the market share when looking at the hospitality industry but when it could be the market leader when it comes to Mexican food. However, the matrix still helps you determine which product is performing well.

Keep checking out my blog regularly, cheers!


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