Note that these responses are not official additions to the theory, only explanations for the cases based on the specific questions received.
Business (market) growth rate
I have calculated the average growth rate for the last three years using information in the case. Is this OK?
Growth rate should always be the expected future growth rate, not the past. If the future growth rate is not available, then the past might be a guide if you also present evidence from the case that the past growth rate is expected to continue in the future.
I would like to know if I defined the market as "abc" do I have to define the growth rate of this particular market or can I use the growth rate of the "xyz" market?
You need to provide a growth rate for the market you defined. If that rate is not explicitly stated in the case then you need to start with growth rates that are given and then modify them based on information in the case (words) so that you support your own estimate for the growth rate of the market that you define. There may also be information for different geographic areas that you could analyze to come up with what you will use.
The key would be to write a section headed Market Growth Rate. Start by saying, I cannot find a growth rate for the market that I have defined and supported, but I am estimating that it is x.x%. Then go on to support why you think this particular number is the correct number.
Is it possible to use the revenue growth rate of the company if the (industry) growth rate is not given?
No. The only time the company forecasted growth rate is acceptable is if the story specifically says that the company's share of market has not changed (which is seldom the case). Based on your feel from the case about what is likely to happen in the future, select a growth rate for your particular market and then support that growth rate. Be reasonable, some rational support is the key. Remember it is forecast future growth rate, not past.
I found a growth rate in the company's report, can I use it for the BCG?
No. You must find a supportable industry growth rate.
In the BCG matrix, if a company has a niche in a certain industry can the growth rate be for the entire industry or does it need to be the growth rate of just the niche market that the company has targeted?
It is supposed to be for the specific market you have defined for the company. If that is a "niche" then you should use the "niche" growth rate. See comment above.
Relative market share
I can't find the market share for the company. How can I do the BCG?
Review the BCG theory. You do not need the market share, only the sales for the company and the comparable sales for its largest competitor in the same industry. If the company and its largest competitor do not share approximately the same market definition, you may need to modify the numbers - if so, be sure you very clearly indicate what you did and why.
If you are the #1 competitor and your ratio is greater than one do I keep the same chart label as in class 0, 0.5, and 1 OR do I adjust the numbers to fit in the result???
Labels on the x-axis of the BCG are: 1or more (not 1); 0.5; and 0. So, if you get a number more than 1, they are the largest company in their industry, then it goes on the left line of the chart.
What strategy should we follow when the intersection point falls exactly on the 2% X-axis between the Stars and Cash Cows?
If, in any tool, the company falls exactly on the line, you need to say that they are between two areas which are x and y and the theory recommends "a" for the first and "b" for the second. In other words, you need to give both recommendations. In some theories, such as the I/E you would then narrow down to what is recommended in both areas (what overlaps).
For the BCG there isn't any overlap in the recommendations, so my position would be that in the long-term, no industry is exactly stable (growth rate unchanging for 5 years in the future), so after you state both, I would recommend that you state that the industry is moving toward xxx sector because the growth rate in the future is either going to decline and be less than 2% or it is going to increase to more than 2%. Then in future sections, like part b of the last question, use that choice. But be sure to first state both recommendations.
How do I go about doing the BCG for the different divisions?
The question requires only one point to be plotted on the BCG - the total company's. From that, you can do part B: what the theory recommends for the company. Do not be confused by what is in the book, follow the instructions in the handout and given in class.
See Sample Answer With Headers For Question 4 for BUS 704 for a sample 4.B. answer.
- Last revised 11/17/2002 -