Page 21 - Portfolio Analysis
P. 21
FIGURE 10
BCG MATRIX
High
Market
Growth
Rate Cash Use
Low
High Cash Generation Low
Market Share
A common problem in this area is that of understanding what is
actually being measured along the axis and what is the relationship of
the individual product or service or division to the axis. The vertical axis
shows the rate of growth of the industry or market: this is the annual
growth rate of the market (or segment of market) in which the company
competes. The axis may cover any range with a starting point of zero.
A further problem which arises is that of locating the horizontal dividing
line which separates high growth markets from low growth markets.
Conventional wisdom has it that 10 per cent should be the dividing point
but this could be substituted by any other figure - for example, related to
rate of growth of GNP.
