BCG Matrix in Portfolio Management - Revision history

Kina0011: /* Comparison to other matrices */

2023-05-08T11:38:18Z

Comparison to other matrices

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	Alternatively, there are several methods in portfolio management that can offer a similar view on the growth share of a company. The most widely used method is developed by McKinsey and it is called – you guessed it, McKinsey matrix, also known as the directional policy matrix.		Alternatively, there are several methods in portfolio management that can offer a similar view on the growth share of a company. The most widely used method is developed by McKinsey and it is called – you guessed it, McKinsey matrix, also known as the directional policy matrix.

	McKinsey matrix ~~categorises~~ business organizations into those with good prospects and those with less good prospects <ref> [''The Directional Policy Matrix'']https://link.springer.com/chapter/10.1007/978-1-349-13877-7_26#:~:text=The%20Directional%20Policy%20Matrix%20(DPM,perceives%20markets%20to%20be%20attractive. </ref>. It places business organizations according to two aspects:		McKinsey matrix categorizes business organizations into those with good prospects and those with less good prospects <ref> [''The Directional Policy Matrix'']https://link.springer.com/chapter/10.1007/978-1-349-13877-7_26#:~:text=The%20Directional%20Policy%20Matrix%20(DPM,perceives%20markets%20to%20be%20attractive. </ref>. It places business organizations according to two aspects:

	- ~~how~~ attractive the relevant market is in which they are operating		- How attractive the relevant market is in which they are operating

	- ~~the~~ competitive strength of the strategic business unit in that market.		- The competitive strength of the strategic business unit in that market.

	The attractiveness can be measured by PESTEL or five forces analyses, while business unit strength can be determined through competitor analysis (such as the strategy canvas). Managers of this organization may be concerned about their relatively low market shares in the largest and most attractive market, while their greatest strength lies in a market with only moderate attractiveness and smaller markets with little long-term potential.		The attractiveness can be measured by PESTEL or five forces analyses, while business unit strength can be determined through competitor analysis (such as the strategy canvas). Managers of this organization may be concerned about their relatively low market shares in the largest and most attractive market, while their greatest strength lies in a market with only moderate attractiveness and smaller markets with little long-term potential.

Kina0011: /* Annotated bibliography */

2023-05-08T11:28:15Z

Annotated bibliography

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	The article highlights the importance of strategic fit and synergy within the business portfolio. Hedley explains that a portfolio should consist of complementary business units that can leverage each other's strengths and create synergistic effects. This strategic fit enables businesses to optimize their resource allocation, reduce redundancies, and enhance overall competitiveness. The author emphasizes that portfolio analysis should be an ongoing process, with regular reassessment of the business units' performance and alignment with strategic objectives. Hedley also highlights the dynamic nature of the business environment and the need for flexibility in portfolio management.		The article highlights the importance of strategic fit and synergy within the business portfolio. Hedley explains that a portfolio should consist of complementary business units that can leverage each other's strengths and create synergistic effects. This strategic fit enables businesses to optimize their resource allocation, reduce redundancies, and enhance overall competitiveness. The author emphasizes that portfolio analysis should be an ongoing process, with regular reassessment of the business units' performance and alignment with strategic objectives. Hedley also highlights the dynamic nature of the business environment and the need for flexibility in portfolio management.

			<ref> [''The Directional Policy Matrix'']https://link.springer.com/chapter/10.1007/978-1-349-13877-7_26#:~:text=The%20Directional%20Policy%20Matrix%20(DPM,perceives%20markets%20to%20be%20attractive. </ref>.

			'''The Directional Policy Matrix'''

			The Directional Policy Matrix (DPM) is a strategic framework used to classify and categorize an organization's business activities based on its strengths, capabilities, market position, and perceived market attractiveness. The DPM provides a structured way to analyze an organization's portfolio of products or areas of operation. This framework enables organizations to conduct a comprehensive analysis of their business activities, assess the strengths and weaknesses of their product offerings, and identify opportunities for growth or necessary strategic adjustments. By considering the relative strength of their offerings and the attractiveness of the markets they operate in, organizations can allocate resources, prioritize investments, and develop appropriate strategies to maximize their competitive advantage.

	== References ==		== References ==

	<references />		<references />

Kina0011: /* Annotated bibliography */

2023-05-08T11:22:00Z

Annotated bibliography

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	This article by Bruce D. Henderson, published in the Boston Consulting Group's journal in 1970, focuses on the relationship between the Experience Curve and the Growth Share Matrix, also known as the Product Portfolio. The article provides a comprehensive review of the Growth Share Matrix, discussing its origin, purpose, and application. Henderson emphasizes the importance of the Experience Curve in understanding the growth potential and profitability of a company's products. The Experience Curve theory suggests that as a company gains experience in producing a particular product, its costs decrease and efficiency improves, resulting in a decrease in the product's per-unit cost over time.		This article by Bruce D. Henderson, published in the Boston Consulting Group's journal in 1970, focuses on the relationship between the Experience Curve and the Growth Share Matrix, also known as the Product Portfolio. The article provides a comprehensive review of the Growth Share Matrix, discussing its origin, purpose, and application. Henderson emphasizes the importance of the Experience Curve in understanding the growth potential and profitability of a company's products. The Experience Curve theory suggests that as a company gains experience in producing a particular product, its costs decrease and efficiency improves, resulting in a decrease in the product's per-unit cost over time.

			<ref> [''Hedley, Barry (1977). Strategy and the "Business Portfolio", p. 9-15''] </ref>

			'''Hedley, Barry (1977). Strategy and the "Business Portfolio", p. 9-15'''

			The article highlights the importance of strategic fit and synergy within the business portfolio. Hedley explains that a portfolio should consist of complementary business units that can leverage each other's strengths and create synergistic effects. This strategic fit enables businesses to optimize their resource allocation, reduce redundancies, and enhance overall competitiveness. The author emphasizes that portfolio analysis should be an ongoing process, with regular reassessment of the business units' performance and alignment with strategic objectives. Hedley also highlights the dynamic nature of the business environment and the need for flexibility in portfolio management.

	== References ==		== References ==

	<references />		<references />

Kina0011: /* Annotated bibliography */

2023-05-08T11:19:40Z

Annotated bibliography

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	== Annotated bibliography ==		== Annotated bibliography ==
	<ref> [''~~BCG History~~''] ~~https://www.bcg.com/about/overview/our-history/growth-share-matrix~~ </ref>.		<ref> [''Henderson, Bruce D. (1970). The Experience Curve - Reviewed IV. The Growth Share Matrix or The Product Portfolio''] </ref>.

	'''Henderson, Bruce D. (1970). The Experience Curve - Reviewed IV. The Growth Share Matrix or The Product Portfolio '''		'''Henderson, Bruce D. (1970). The Experience Curve - Reviewed IV. The Growth Share Matrix or The Product Portfolio '''

Kina0011: /* Annotated bibliography */

2023-05-08T11:18:28Z

Annotated bibliography

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	<ref> [''BCG History''] https://www.bcg.com/about/overview/our-history/growth-share-matrix </ref>.		<ref> [''BCG History''] https://www.bcg.com/about/overview/our-history/growth-share-matrix </ref>.

	'''~~Fisher~~, ~~N. I., & Kordupleski, R. E~~. (~~2018~~). ~~“Good and bad market research: A critical review of Net Promoter Score”~~ '''~~<ref name="a1" />~~		'''Henderson, Bruce D. (1970). The Experience Curve - Reviewed IV. The Growth Share Matrix or The Product Portfolio '''

	This article by Bruce D. Henderson, published in the Boston Consulting Group's journal in 1970, focuses on the relationship between the Experience Curve and the Growth Share Matrix, also known as the Product Portfolio. The article provides a comprehensive review of the Growth Share Matrix, discussing its origin, purpose, and application. Henderson emphasizes the importance of the Experience Curve in understanding the growth potential and profitability of a company's products. The Experience Curve theory suggests that as a company gains experience in producing a particular product, its costs decrease and efficiency improves, resulting in a decrease in the product's per-unit cost over time.		This article by Bruce D. Henderson, published in the Boston Consulting Group's journal in 1970, focuses on the relationship between the Experience Curve and the Growth Share Matrix, also known as the Product Portfolio. The article provides a comprehensive review of the Growth Share Matrix, discussing its origin, purpose, and application. Henderson emphasizes the importance of the Experience Curve in understanding the growth potential and profitability of a company's products. The Experience Curve theory suggests that as a company gains experience in producing a particular product, its costs decrease and efficiency improves, resulting in a decrease in the product's per-unit cost over time.

Kina0011: /* Annotated bibliography */

2023-05-08T11:17:34Z

Annotated bibliography

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	== Annotated bibliography ==		== Annotated bibliography ==
	<ref ~~name="a1"~~ />.		<ref> [''BCG History''] https://www.bcg.com/about/overview/our-history/growth-share-matrix </ref>.

	'''Fisher, N. I., & Kordupleski, R. E. (2018). “Good and bad market research: A critical review of Net Promoter Score” '''<ref name="a1" />		'''Fisher, N. I., & Kordupleski, R. E. (2018). “Good and bad market research: A critical review of Net Promoter Score” '''<ref name="a1" />

Kina0011: /* Annotated bibliography */

2023-05-08T11:16:43Z

Annotated bibliography

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	'''Fisher, N. I., & Kordupleski, R. E. (2018). “Good and bad market research: A critical review of Net Promoter Score” '''<ref name="a1" />		'''Fisher, N. I., & Kordupleski, R. E. (2018). “Good and bad market research: A critical review of Net Promoter Score” '''<ref name="a1" />

	~~Fisher~~ and ~~Kordupleski (2018) reviews~~ the ~~commonly used customer centric KPI~~, the ~~net promoter score (NPS~~, and ~~how it is used to measure customer satisfaction and loyalty~~. ~~The authors discus~~ the ~~limitations~~ of ~~this specific KPI~~ and ~~concludes~~ that ~~it cannot be used~~ as ~~the sole measure of customer satisfaction. Furthermore~~, ~~highlights that it should rather be supplemented with other KPIs to provide~~ a ~~complete picture of customer feedback~~.		This article by Bruce D. Henderson, published in the Boston Consulting Group's journal in 1970, focuses on the relationship between the Experience Curve and the Growth Share Matrix, also known as the Product Portfolio. The article provides a comprehensive review of the Growth Share Matrix, discussing its origin, purpose, and application. Henderson emphasizes the importance of the Experience Curve in understanding the growth potential and profitability of a company's products. The Experience Curve theory suggests that as a company gains experience in producing a particular product, its costs decrease and efficiency improves, resulting in a decrease in the product's per-unit cost over time.


	== References ==		== References ==

	<references />		<references />

Kina0011: /* References */

2023-05-08T11:13:42Z

References

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	The directional policy matrix provides recommendations for business unit placement based on strategy. It advises investing in businesses with the most potential for growth and the highest strength, while divesting or "harvesting" those in unattractive markets or with lower strength. Compared to the BCG matrix, the directional policy matrix is more intricate, but it has two potential advantages. First, it recognizes the possibility of a challenging middle ground that the four-box BCG matrix does not. Second, it includes nine cells, offering a more detailed analysis.		The directional policy matrix provides recommendations for business unit placement based on strategy. It advises investing in businesses with the most potential for growth and the highest strength, while divesting or "harvesting" those in unattractive markets or with lower strength. Compared to the BCG matrix, the directional policy matrix is more intricate, but it has two potential advantages. First, it recognizes the possibility of a challenging middle ground that the four-box BCG matrix does not. Second, it includes nine cells, offering a more detailed analysis.

			== Annotated bibliography ==
			<ref name="a1" />.

			'''Fisher, N. I., & Kordupleski, R. E. (2018). “Good and bad market research: A critical review of Net Promoter Score” '''<ref name="a1" />

			Fisher and Kordupleski (2018) reviews the commonly used customer centric KPI, the net promoter score (NPS, and how it is used to measure customer satisfaction and loyalty. The authors discus the limitations of this specific KPI and concludes that it cannot be used as the sole measure of customer satisfaction. Furthermore, highlights that it should rather be supplemented with other KPIs to provide a complete picture of customer feedback.


	== References ==		== References ==

	<references />		<references />

Kina0011: /* Annotated bibliography */

2023-05-08T11:12:50Z

Annotated bibliography

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	The directional policy matrix provides recommendations for business unit placement based on strategy. It advises investing in businesses with the most potential for growth and the highest strength, while divesting or "harvesting" those in unattractive markets or with lower strength. Compared to the BCG matrix, the directional policy matrix is more intricate, but it has two potential advantages. First, it recognizes the possibility of a challenging middle ground that the four-box BCG matrix does not. Second, it includes nine cells, offering a more detailed analysis.		The directional policy matrix provides recommendations for business unit placement based on strategy. It advises investing in businesses with the most potential for growth and the highest strength, while divesting or "harvesting" those in unattractive markets or with lower strength. Compared to the BCG matrix, the directional policy matrix is more intricate, but it has two potential advantages. First, it recognizes the possibility of a challenging middle ground that the four-box BCG matrix does not. Second, it includes nine cells, offering a more detailed analysis.

	== ~~Annotated bibliography~~ ==		== References ==

	<references />		<references />

Kina0011: /* Strengths and limitations */

2023-05-05T14:54:45Z

Strengths and limitations

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	However, while it is valuable, it has indeed several drawbacks. Firstly, the matrix's reliance on market share and growth overlooks other critical variables such as customer demand and competitive pressure. Secondly, the matrix assumes that high market share and growth are always favourable, which may not be the case. Finally, the matrix is static and fails to consider shifts in the market over time. Although products may shift between categories over time, the matrix does not account for this.		However, while it is valuable, it has indeed several drawbacks. Firstly, the matrix's reliance on market share and growth overlooks other critical variables such as customer demand and competitive pressure. Secondly, the matrix assumes that high market share and growth are always favourable, which may not be the case. Finally, the matrix is static and fails to consider shifts in the market over time. Although products may shift between categories over time, the matrix does not account for this.

	Despite its theoretical usefulness and widespread use, the efficacy of the growth-share matrix in contributing to business success has been investigated by several academic studies, resulting in its removal from some significant marketing textbooks. In 1992, a study was conducted by Slater and Zwirlein where they examined 129 firms that used the BCG matrix in their portfolio planning models. The study has shown that those firms tend to have lower shareholder returns. Furthermore, the BCG matrix has been criticized on several other grounds. For instance, it categorizes dogs as entities with low market share and relatively low market growth rate.		Despite its theoretical usefulness and widespread use, the efficacy of the growth-share matrix in contributing to business success has been investigated by several academic studies, resulting in its removal from some significant marketing textbooks <ref> [''An Analysis on BCG Growth Sharing Matrix''] https://www.researchgate.net/publication/322695566_An_Analysis_on_BCG_Growth_Sharing_Matrix </ref>. In 1992, a study was conducted by Slater and Zwirlein where they examined 129 firms that used the BCG matrix in their portfolio planning models. The study has shown that those firms tend to have lower shareholder returns. Furthermore, the BCG matrix has been criticized on several other grounds. For instance, it categorizes dogs as entities with low market share and relatively low market growth rate.

	= Comparison to other matrices =		= Comparison to other matrices =