I return to this article from a presentation back in 2003, to prove how the BCG growth matrix is not just a theoretical tool only applicable to the large firms and multinational, but a fascinating tool perfectly of being applicable by any SME.
More than 40 years after Bruce Henderson introduced the BCG growth-share matrix and the concept is still compelling today. Companies continue to need a method to manage their portfolio of products, R&D investments, and business units in a disciplined and systematic way.
The matrix helps companies decide which markets and business units to invest in on the basis of two factors; company competitiveness and market attractiveness, with the underlying drivers for these factors being relative market share and growth rate, respectively. Since you can all Google for the search of this matrix, I shall not go into any more detail. However, I would like to mention how the BCG matrix being central in business school teaching on strategy, all the teaching material has been set to assist the needs of the large organisations and with almost no beneficial effect upon the SMEs.
However, this statement is not entirely accurate and true. Let us see how we can turn the current perspective all around and make the BCG as useful to the SMEs as it is to the large organisations here today.
I will not deny that the implementation of the BCG matrix on any SME it is a very complicated task itself, and mainly because it is very complicated to get all the relevant information regarding the two parameters of the BCG matrix necessary to run the matrix on a SME. However, this disadvantage can be turned into an opportunity. Let´s elaborate.
Instead of implementing the BCG matrix within their companies, the SMEs should get the best possible return from the work already done by the large organisation.
Let´s say that any company that works for the automotive sector and it is, for instance, supplier to the Ford Company in the range either of tier 3, 2 or 1, what this SME should have clear it is where do each and every of its manufactured components go to, so as to have a clear picture of the SME´s strategies to follow.
Every SME should have, and it is fairly easy to perform, the BCG matrix of each and every large firm they supply to; in this case it should be the BCG matrix of the Ford Company. Once ever SME is in the possession of its final client´s matrix, the SME will have a clear picture of any of the possible future strategic directions; the Ford Company may follow with each and every of its different car models. All of the car models will appear located on any of the four possible quadrants belonging to the BCG matrix. Some car models will appear located at the top left corner of the matrix, some car models will appear located at the top right corner of the matrix, some car models will appear located at the bottom left corner of the matrix and some car models will appear located ay the bottom right corner of the matrix. Following the rules regulating the use of the BCG matrix it is up to the SMEs to come up with a clearer picture of the possible future strategies should have to consider with regards the Ford Company and the car models is working for.
So….. How should I proceed if most of my manufactured components are part of a larger subcomponent that goes fitted with a car model clearly located at the bottom right corner of the Ford Company´s BCG matrix? (This is the corner corresponding to the category of the dog). We could replicate the same question for each an every car model located on any of the three left quadrants.
With all the information gathered with the performance and the analysis of the matrix, it will lead to the SME to think about its current customer´s strategy and/or to look for new customers with a more diversified risk on their product portfolio. The possible future strategies the SME can come up with, may all well been like a toss of a coin. However, this is better than nothing.
Going through this exercise we have noticed how most SMEs come to realise how powerful the BCG matrix turns out to be in order to protect their particular interests.
The trick is to see the BCG from a different perspective.
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