The Boston Consultancy Group (BCG) came up with the BCG matrix which has been used in marketing for years. Understanding the BCG matrix can help companies to be better equipped to optimise their businesses. Every business must enable its marketing function so that it’s prepared to deal with the different pressures that come with trading and clients’ requirements. The BCG states that the company’s products or business units can be on the following stages which are all based on market share and market growth:
Dogs: have low market share and low growth, hence consume resources.
Question marks: low market share but grow rapidly, hence consume high resources.
Stars: have strong relative market share and a high growth rate.
Cash cow: a leader in the market and have a return which is higher than the growth rate.
In order for the business to be able to optimise its operations in its marketing systems, it has to be able to assess where it is in the BCG matrix.
A company could be supporting a product that is a dog, one with no real return but simply consumes the cash flow of the company. There are many products which are like that, which are kept merely for sentimental reasons, but in the real sense have no return. These could also be business units that the company has which are not viable. Return would be lower than the required rate of return such that the investment strains other units.
Business optimisation is about being able to maximise the potential of the business by ensuring that the company delivers from every aspect. Lean management advocates argue that a company should be as lean as possible to be efficient.
In the real sense, most Zimbabwean companies are not aware of where their products or business units actually fit in the BCG matrix. Even if one may not use the BCG matrix, there is still need for continuous assessment which looks at asset return and product return. At any point, the company must be able to judge which section of their business is viable and which one is in decline.
Companies are guilty for failing to plan for their future by failing to recognise when their products or business units are in a late maturing stage. Failing to take note of that means revenue will decline and the company will not have a substitute to replace the declining revenues. Continuous assessment is necessary for planning purposes. No company executive team member should ever be surprised by a non-performing product or business unit; it should be known and planned for in advance.
The BCG matrix enables the business to have an idea on where it is placed and what it needs to do to succeed. It is not the only tool, but it gives the company an idea of how it is performing and can be used with other different tools for business optimisation.
Winston Zvirikuzhe is an Assurance executive at one of the telecom companies in Zimbabwe with extensive experience in strategy and performance management, as well as audit, risk and advisory services.
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