Question

As Sr. VP of Marketing for your company, fully discuss your views regarding both the usage and limitations of portfolio models such as the "Boston Consulting Group’s Growth-Share Matrix." (Please elaborate, use examples, and fully discuss)

Answer 1

The Boston consulting Group's Growth-Share Matrix is one of the most useful models to identify the present scenario of the various SBUs (Strategic Business Units) of an Organization and give direction whether to continue with a particular SBU , sell it off , invest more in it or slowly withdraw from it.

The Boston consulting Group's Growth-Share Matrix has four quadrants. Let us understand each quadrant and strategies for related business units from the below given diagram:

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As evident from the figure, depending upon the market share and market growth, the head of Marketing can take decisions to divest, invest, liquidate or promote a particular division or a strategic business unit.

After a thorough analysis of the matrix we can conclude its usage and limitations as follows:

Usage:

• Informed decision making on the present and future strategies of the various business units of the organization.
• Take decisions pertaining to liquidation, investment, divestment or maintaining a strategic business unit.
• Understand the various positions of the brand , its present growth status and market share.
• Brand based strategy and not a generic strategy for a particular brand.
• Cost cutting and Profit maximization while taking strategic corporate level decisions.

Limitations:

• Many brands and business unit may be profitable in some part of the country or globe but may not have a sustainable market share in other parts.
• It is very difficult to judge the growth rate and market share accurately over a period of time.
• The matrix ignores external factors such as Political, Social, Economical or Technological which can have huge impact on the business.
• The matrix ignore the emotional values that some brands have with relation to customer connect, which does not always reflects in terms of market share or growth.

To conclude, as a Senior VP of Marketing, matrix such as Boston Consulting Group’s Growth-Share Matrix should not be used in isolation but along with other strategic tools such as PESTLE analysis ( Political, Economical, Social, Technological, Legal and Environmental) , Porter's Five forces model, the value chain analysis etc. The present market scenario, Government policies , future customer preferences and the ever changing customer desires must be kept in mind too.