Benefits And Limitation Of Bcg 5s372s

Benefits of BCG-Matrix Organizations that are very large such that they require setting up business units usually face the test of the allocation of resources among those business units. The BCG matrix was developed by Boston Consulting Group for the management of various business units. Using the BCG opens an organization to several benefits such as : 1. SimplifiesManagement The BCG is an effective management tool and it offers a good framework for resource allocation among various units. This enables the managers to compare several business units whenever they want. It simplifies many business factors through showing employees the market share as well as growth rate and how to use them to create new strategies. 2. PopularMatrix Even though BCG matrix may be among the oldest matrices ever formulated, it is also the most common and best known matrix taught all over the world. There are forums on the internet where individuals share their ideas on the best methods of using BCG matrix because of its popularity. This means that those looking to use it will never lack assistance and . The BCG still remains a quick and beneficial guide for resource allocation and ensuring better profits. 3. BetterDecisionMaking The BCG allows for the making of comparisons so as to measure the growth and development rate of a company against the average growth rate in that specific industry. In addition, this particular matrix is also enjoyable to use, encouraging better decision making. Large organizations that are normally in need of effective decision making can benefit a lot from using BCG matrix, especially those seeking better resource management. Nevertheless, the BCG model only takes into two dimensions, which are growth rate and market share. This might tempt the management to focus on a certain product or divest prematurely.

Limitations of the BCG-Matrix: 

It neglects the effects of synergies between business units.

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High market share is not the only success factor.

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Market growth is not the only indicator for attractiveness of a market.

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Sometimes Dogs can earn even more cash as Cash Cows.

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The problems of getting data on the market share and market growth.

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There is no clear definition of what constitutes a “market”.

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A high market share does not necessarily lead to profitability all the time.

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The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or todivest prematurely.

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A business with a low market share can be profitable too.

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The model neglects small competitors that have fast growing market shares.