Advantages of using the BCG method in portfolio analysis:
Clarity and simplicity of analysis of the company's portfolio.
The ability to identify the most promising areas for investment and support.
Identification of unprofitable areas that consume the company's resources.
Understanding industry doctor data package trends and company development relative to the market through comparison of BCG matrices in different reporting periods.
Despite the advantages, the BCG method also has some disadvantages :
Simplification of the market situation, for example, “dogs” according to the BCG matrix are considered unprofitable and can be removed from the assortment, but at the same time the flow of customers for whom this product is important may decrease.
The data reflected in the matrix can only be relevant in a stable market situation.
The BCG matrix indicates the direction of investment, but does not provide tactical instructions for implementation. To develop promising areas, it will be necessary to develop a marketing strategy, identify competitive advantages and implement promotional activities.
When constructing a BCG matrix, a number of points must be taken into account. It should be understood that an active growth rate of a segment does not always indicate the attractiveness of the industry. It is influenced by various micro- and macroeconomic factors, the presence of high entry barriers, etc.
With rapid growth, it is also unclear how long this trend will last. And when assessing the prospects of the direction, it is necessary to take into account that high competition is formed in fast-growing markets, price wars are possible, which will negatively affect the profitability of the product category.
By using our advice and creating your own BCG matrix, you will be able to qualitatively analyze the sales market, develop an effective strategy to increase profits, grow income from the sale of specific products and develop your business.c