Tips for Calculating Market Share – the BCG Matrix

Market Share is an important indicator of the strength of a business within its industry. This is an important calculation for consultants to use in order to help companies analyse and allocate their resources for maximum efficiency and profit.

In the 1970s the Boston Consulting Group (BCG) developed a new way to represent market share by plotting a scatter graph which ranked business units/products against their relative market share (i.e. growth rate). For simplicity, BCG named the different quadrants the following:

• Cash cows are businesses that have a high market share (and are therefore generating lots of cash) but low growth prospects (and therefore a low need for cash). They are often in mature industries that are about to fall into decline.

• Stars have high growth prospects and a high market share.

• Question marks have high growth prospects but a comparatively low market share (and have also been known as wild cats).

• Dogs, by deduction, are low on both growth prospects and market share.

BCG_Matrix

This method therefore provides a graphic representation for an organisation to examine different businesses that it owns on the basis of their related market share. This is now known as the BCG Growth Share Matrix and the following articles go through how to make one…

http://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html An article that explains what the quarants mean and how to fill out the matrix along with an assessment of the pros and cons of using this matrix.

http://managementstudyguide.com/bcg-matrix.htm Another worked through example of the BCG matrix

http://www.businessnewsdaily.com/5693-bcg-matrix.html Short Business Daily article that goes through the quadrants thoroughly

So now it’s time to learn how to make the market share calculations and graphs in Excel  (which as we know by now, is a consultant’s best friend…!)

Read this screen shot tutorial http://best-excel-tutorial.com/56-charts/176-bcg-matrix

And then have look at this useful Youtube video:

And you’re good to go, you Market share expert you!

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