BCG Growth Share Matrix for Strategic Management

Boston Consulting Group developed this BCG Growth Share Matrix which helps you to determine what priorities should be given in your product portfolio of a product. BCG growth share matrix is a strategic management analytical tool. This provides guidance for all resource allocation among the company 
‘s business units.

BCG matrix has essentially two dimensions – relative market share and market growth rate. It can be used to classify product portfolio in four business types based on four graphic labels including Stars, Cash Cows, Dogs and Question Marks.

Stars: Leaders of the business comes in stars group. Products in this category are in high growth rate & high market share. It generates high cash flow and requires high cash input. Cash flow is flat in this category.

Cash Cows: Foundation of the business (stars of past years). Products in this category are in low growth rate & high market share. They generate high cash flow with low cash input requirements.

Dogs: Drags of the business. Products in this category are in low growth rate & low market share. They must be avoided whenever possible. Liquidate as many as possible.

Question Marks: Ambiguity of the business – Products in this category are in high growth rate & low market share. It requires high cash demand and low returns. Usually new products are comes in question marks. If you keep new products in question marks, you must ensure increase in market share and deliver cash.

Strategies to Pursue BCG Matrix

Build: The product market share needs to be increased to strengthen its position. Short-term earnings and profits are intentionally forfeited because it is hoped that the long-term earnings and profit will be much higher than this. This strategy is suited to Question Marks if they want to become stars.

Hold: The objective is to maintain the current market share position and this strategy is often used for Cash Cows so that they continue to generate large amounts of cash.

Harvest: Company tries to increase short-term cash flows as far as possible even at no profit and no loss. It is a strategy suited to weak Cash Cows or Cash Cows that are in a market with a limited future. Harvesting is also used for Question Marks where there is no possibility of turning them into Stars, and for Dogs.

Divest: This strategy is to rid the organization of the products that are drain on profits and to utilize these resources elsewhere in the business to make greater benefit. This strategy is typically used for Question Marks that will not become Stars and Dogs.

5 tips to be an active listener

Listening is one of the most important skills you can have. How well you listen has a major impact on your job effectiveness, and on the quality of your relationships with others.

Why is it important to become a good listener?

  •  We listen to obtain information.
  •  We listen to understand.
  •  We listen for enjoyment.
  •  We listen to learn.

Unfortunately, most of us only remember somewhere between 25-50% of what we hear, which means when we’re receiving directions or being presented with information, we probably aren’t hearing the whole message.  So, boosting our listening skills is important.  By becoming better listeners, we can avoid conflict and misunderstandings and improve our productivity, as well as our ability to influence, persuade and negotiate.

There are 5 key elements of active listening. They help ensure that you hear the other person, and that the other person knows you are hearing what they are saying.

1.      Pay Attention.
Give the speaker your undivided attention and acknowledge what they’re saying. Recognize that what is not said also speaks loudly.

  • Look at the speaker directly.
  • Shelve distracting thoughts. Don’t mentally prepare a rebuttal.
  • Avoid being distracted by other things happening around you.
  • Listen” to the speaker’s facial expressions and body language.
  •  Refrain from side conversations (when listening in a group setting).

2.      Show that You’re Listening.
Use your own body language and gestures to convey your attention.

  • Put away electronic devices. They can often be used as a distraction and a way to tune out.  Using them is disrespectful to the speaker.
  •  Nod occasionally, and smile and use other facial expressions.
  • Note your posture and make sure it is open and inviting.  Crossed arms or “lazy” posture indicates that you’re not engaged.
  • Encourage the speaker to continue.  Use small verbal cues, such as “yes,” and “uh huh.”

3.      Provide Feedback.
Our personal beliefs, assumptions and judgments can distort what we hear. As a listener, your role is to understand what is being said.

  • Reflect what has been said by paraphrasing. “What I‚m hearing is,” and “Sounds like you are saying” are great ways to reflect back.
  • Ask questions to clarify certain points. “What do you mean when you say,” and “Is this what you mean?”
  • Summarize the speaker’s comments periodically.

4.      Defer Judgment.
Interrupting is a waste of time. It frustrates the speaker and limits full understanding of the message.

  • Allow the speaker to finish.
  • Don’t interrupt with counter-arguments.

5.      Respond Appropriately.
Active listening is a model for respect and understanding. You are gaining information and perspective. You add nothing by attacking the speaker or otherwise putting him or her down.

  • Be candid, open, and honest in your response.
  • Assert your opinions respectfully.
  • Treat the other person as he or she would want to be treated.

How can active listening help you in your professional or personal life?  Share your comments.

Zen Stories II

Holy Man

Word spread across the countryside about the wise Holy Man who lived in a small house atop the mountain. A man from the village decided to make the long and difficult journey to visit him.

When he arrived at the house, he saw an old servant inside who greeting him at the door.
“I would like to see the wise Holy Man,” he said to the servant.

The servant smiled and led him inside. As they walked through the house, the man from the village looked eagerly around the house, anticipating his encounter with the Holy Man.
Before he knew it, he had been led to the back door and escorted outside. He stopped and turned to the servant,

“But I want to see the Holy Man!”

“You already have,” said the old man. “Everyone you may meet in life, even if they appear plain and insignificant… see each of them as a wise Holy Man. If you do this, then whatever problem you brought here today will be solved.”

I Don’t Know

The emperor, who was a devout Buddhist, invited a great Zen master to the Palace in order to ask him questions about Buddhism.

“What is the highest truth of the holy Buddhist doctrine?” the emperor inquired.

“Vast emptiness… and not a trace of holiness,” the master replied.

“If there is no holiness,” the emperor said, “then who or what are you?”

“I do not know,” the master replied.

Is That So?

A beautiful girl in the village was pregnant. Her angry parents demanded to know who was the father. At first resistant to confess, the anxious and embarrassed girl finally pointed to Hakuin, the Zen master whom everyone previously revered for living such a pure life. When the outraged parents confronted Hakuin with their daughter’s accusation, he simply replied “Is that so?”

When the child was born, the parents brought it to the Hakuin, who now was viewed as a pariah by the whole village. They demanded that he take care of the child since it was his responsibility. “Is that so?” Hakuin said calmly as he accepted the child.

For many months he took very good care of the child until the daughter could no longer withstand the lie she had told. She confessed that the real father was a young man in the village whom she had tried to protect. The parents immediately went to Hakuin to see if he would return the baby. With profuse apologies they explained what had happened. “Is that so?” Hakuin said as he handed them the child.

Nature’s Beauty

A priest was in charge of the garden within a famous Zen temple. He had been given the job because he loved the flowers, shrubs, and trees. Next to the temple there was another, smaller temple where there lived a very old Zen master.

One day, when the priest was expecting some special guests, he took extra care in tending to the garden. He pulled the weeds, trimmed the shrubs, combed the moss, and spent a long time meticulously raking up and carefully arranging all the dry autumn leaves. As he worked, the old master watched him with interest from across the wall that separated the temples.

When he had finished, the priest stood back to admire his work. “Isn’t it beautiful,” he called out to the old master. “Yes,” replied the old man, “but there is something missing. Help me over this wall and I’ll put it right for you.”

After hesitating, the priest lifted the old fellow over and set him down. Slowly, the master walked to the tree near the center of the garden, grabbed it by the trunk, and shook it. Leaves showered down all over the garden. “There,” said the old man, “you can put me back now.”

Also Read:

Zen Stories I

Zen Stories III
Zen Stories IV 

Price Deflator / GDP Deflator

What is a price deflator ?

A deflator is used to convert data compiled over a period into prices prevailing at an earlier point in time.for example,the current price of a television can be deflated to what it would cost say three years ago.Essentially,a deflator removes the effect of inflation from data,making it comparable across periods.

What is the role of price deflator in GDP calculations ?

Prices are always in a state of flux,but generally move upwards over time.Therefore,a change in prices can give the impression of an increase in the gross domestic product (GDP — a measure of national income) even without an increase in the quantity of goods and services produced by an economy.The impact of prices has to be removed to arrive at a true measure of economic growth.A deflator is used to restate output estimates at current prices into what they would be if calculated with reference to prices in an earlier year.This will give an idea of the real growth in the economy,minus the price effect.

Why is GDP deflator considered a good measure of inflation ?

The ratio between the GDP at current prices and GDP at constant prices gives an idea of the increase in prices of all goods and services with reference to the base year.In that sense it is a more comprehensive measure of inflation than price indices,which are based only on a limited basket of goods collected from select centres.However,the deflator comes with a lag,which limits its usefulness.

How is it used in India ?

In India a combination of WPI and CPI is used as deflator.The usage is dependent on the particular estimate we are trying to deflate.There will be different deflators for private consumption and government consumption.There is a difference in the value of quarterly and year-end deflators.This is due to the fact that prices are not constant.At the year-end we have an overall measure of WPI/CPI,which is used appropriately.This is why year-end estimates of GDP are more reliable than quarterly estimates.