BCG Matrix and Nestle

The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. Company's business units can be classified into four categories based on combination of market growth and market share relative to the largest competitor that are Growth share and Market share. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability.This portfolio assume that if market share will increase than cash generation is also increase.


This assume is true because of experience curve ,increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors.A one more assumption is that growing market require investment in assets to increase capacity and result in cash.


There is four categories :-

Dog :-
Dog have low market share and also low market growth, means neither generate and consume  a large amount of cash.dog have some risk, cash are tide up in  business

Question Mark :-
Question mark growing rapidly so its means consume large amount of cash but have low market share its means it do not generate much cash . it also know as problem child. it has potential to gain market share and become star and also become cash cow when market grow slows.If Question does not become market leader then it designated into dog.

Star:-
Star generate large amount of  cash because strong market share and also consume large cash because of high market growth rate.If a star can maintain its large market share, it will become a cash cow when the market growth rate declines.

Cash Cow:-
Cash Cow is the leader in Mature market. In Cash Cow Relative Market share is High and market growth rate is low.it generate more cash than they consume .they extract more profit in little investment. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. it generate stable cash flow

The growth-share matrix also can be used for resource allocation among products within a single business unit.

            BCG Matrix of Nestle
 1)Mineral Water            -   Star
 2)Milk park                    -  Cash Cow
 3)Noodles                      -  Question Mark
 4)Chocolates/Juices       -  Dog

1) In Nestle`s BCG Matrix Mineral water has high Growth Rate and high market share. Demand of Mineral water was increased  than other product in 1992 and  Nestle was was the first company to launch the Mineral Water.In 1998 , for the first History of Nestle ,Nestle associates its name with water bottle "Nestle pure life".

2) Milk Park as a cash cow low market growth rate but high market share.Milk Park is the product in liquid form which launch due to high Demand of milk.milk park has high Generation of cash in low investment.
 

3) Noodles as Question Mark use high cash but low generation of profit .In other word low market share but high growth rate. .in noodles business investment is high ,use of cash is high but do not genrate large profit.

4) chocolate/ juice business has low generation of cash and low market share.They are not capable to generate cash or neither consume more cash.



 Conclusion:-

The BCG matrix still can serve as a simple tool for viewing a corporation's business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units.
Nestle use BCG Matrix for view the business portfolio. which help org for more profit.



Reference:-

http://www.netmba.com/strategy/matrix/bcg/
http://www.slideshare.net/mutahirbilal47/bcg-matrix-of-nestle