University of Wah,

Department of Chemical Engineering

Document No: UW/Ch.E/AF/REV00
UNIVERSITY OF WAH
WAH ENGINEERING COLLEGE
Department of Chemical Engineering
Assignment # 03

Course Title: Engineering Management

Semester:7th Course Teacher: Mr. Fazeel Ahmad
Total Marks: 20 Time: 1 week (6-11-2021)
Course Code: MGT-401
Student Name: M.Zain Najam Reg No. UW-18-Ch.E-BSC-009

Assignment Title:

Course Program Learning Domain

Learning Learning
Outcome Outcome
Cognitive

CLO-1 PLO-11 Level (C-2)

Q.1 [10]

a) Explain the BCG matrix with at least two examples having in the following organizations

I) University

2) Industry

3) Restaurant

Page 1 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
Table of Contents
Chapter 1 BCG Matrix ............................................................................................................. 5
1.1 What Is A BCG Matrix? ............................................................................................. 5
1.1.1 Stars...................................................................................................................... 5
1.1.2 Cash Cows ........................................................................................................... 6
1.1.3 Dogs ..................................................................................................................... 6
1.1.4 Question Marks .................................................................................................... 6
1.2 How to Make a BCG Matrix? ..................................................................................... 6
1.2.1 Step 1: Choose The Product ................................................................................. 6
1.2.2 Step 2: Define the Market .................................................................................... 7
1.2.3 Step 3: Calculate the Relative Market Share ....................................................... 7
1.2.4 Step 4: Find Out The Market Growth Rate .......................................................... 7
1.2.5 Step 5: Draw the Circles On A Matrix ................................................................. 7
1.3 How to Use a BCG Matrix? ........................................................................................ 7
1.3.1 Stars...................................................................................................................... 7
1.3.2 Question Marks .................................................................................................... 8
1.3.3 Cash Cows ........................................................................................................... 8
1.3.4 Dogs ..................................................................................................................... 8
1.4 BCG Matrix of University ........................................................................................... 9
1.5 BCG Matrix for Industry............................................................................................. 9
1.5.1 Stars of University................................................................................................ 9
1.5.2 Question Marks of University ............................................................................ 10
1.5.3 Cash Cows of University ................................................................................... 10
1.5.4 Dogs of University ............................................................................................. 10
1.6 BCG Matrix of Lucky Cement .................................................................................. 10
1.7 BCG Matrix of Attock Refinery Limited .................................................................. 10
1.7.1 Stars of Attock Oil Refinery .............................................................................. 11
1.7.2 Cash Cows of Attock Oil Refinery .................................................................... 12
1.7.3 Question Marks of Attock Oil Refinery ............................................................. 12
1.7.4 Dogs of Attock Oil Refinery .............................................................................. 13
1.8 BCG Matrix of Angro Foods .................................................................................... 14
1.9 BCG Matrix of Pizza Hut .......................................................................................... 14
1.9.1 Stars of Pizza Hut ............................................................................................... 14
1.9.2 Cash Cows of Pizza Hut..................................................................................... 15

Page 2 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.9.3 Question Marks of Pizza Hut ............................................................................. 16
1.9.4 Dogs of Pizza Hut .............................................................................................. 16
1.10 BCG Matrix of McDonald’s...................................................................................... 17
1.10.1 Stars of McDonald’s ......................................................................................... 17
1.10.2 Cash Cow of McDonald’s ................................................................................. 17
1.10.3 Question Mark of McDonald’s ......................................................................... 18
1.10.4 Dogs of McDonald’s ......................................................................................... 18
1.11 Advantages of BCG Matrix....................................................................................... 18
1.12 Limitations of BCG Matrix ....................................................................................... 18
1.13 References ................................................................................................................. 20

Page 3 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
List of Figures
Figure 1 BCG diagram ............................................................................................................... 5
Figure 2 BCG Matrix of University ........................................................................................... 9
Figure 3 BCG Matrix Growth Share in Market ......................................................................... 9
Figure 4 BCG Matrix Strategy in Lucky Cement .................................................................... 10
Figure 5 BCG Matrix of Attock Oil Refinery Limited ............................................................ 11
Figure 6 BCG Matrix of Angro Foods ..................................................................................... 14
Figure 7 BCG Matrix of Pizza Hut .......................................................................................... 14
Figure 8 BCG Matrix of McDonald's ...................................................................................... 17

Page 4 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
Chapter 1 BCG Matrix
1.1 What Is A BCG Matrix?
The BCG matrix (also known as the Growth-
Share Matrix) is a portfolio planning model that analyses items in a company's portfolio base
d on their growth and relative market share.

The model is based on the fact that a company's business divisions can be divided into four gr
oups:

1. Cash Cows
2. Stars
3. Question Marks
4. Dogs

Figure 1 BCG diagram

It is based on the combination of market growth and market share relative to the next best
competitor.

1.1.1 Stars

 High Growth, High Market Share

Star units are leaders in the category. These products have –

 A significant market share, hence they bring most cash to the business.
 A high growth potential that can be used to increase further cash inflow.

Page 5 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
With time, when the market matures, these stars become cash cows that hold huge market
shares in a low growth market. Such cows are milked to fund other innovative products to
develop new stars.

1.1.2 Cash Cows

 Low Growth, High Market Share

Cash cows are products with significant ROI but operating in a matured market which lacks
innovation and growth. These products generates more cash than it consumes.

Usually, these products finance other activities in progress (including stars and question
marks).

1.1.3 Dogs

 Low Growth, Low Market Share

Dogs hold low market share and operate in a market with a low growth rate. Neither do they
generate cash nor do they require huge cash. In general, they are not worth investing
in because they generate low or negative cash returns and may require large sums of money
to support. Due to low market share, these products face cost disadvantages.

1.1.4 Question Marks

 High Growth, Low Market Share

Question marks have a high growth potential but a low market share which makes their future
potential to be doubtful. Since the growth rate is high here, with the right strategies and
investments, they can become cash cows and ultimately xstars. But they have low market
share so wrong investments can downgrade them to Dogs even after lots of investment.

1.2 How to Make a BCG Matrix?

So far we know products are classified into four types. Now we will see on what basis and
how is that classification done.

We shall understand the five processes of making a BCG matrix better by making one for
L’Oréal in the sections to follow.

1.2.1 Step 1: Choose The Product

BCG matrix can be used to analyse Business Units, separate brands, products or a firm as a
unit itself. The choice of the unit impacts the whole analysis. Therefore, defining the unit is
necessary.

Page 6 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.2.2 Step 2: Define the Market

An incorrectly defined market can lead to a poor classification of products. For example, if
we would do the analysis for the Daimler’s Mercedes-Benz car brand in the passenger vehicle
market it would end up as a dog (it holds less than 20% relative market share), but it would
be a cash cow in the luxury car market. Defining the market accurately is, therefore, an
important pre-requisite for better understanding the portfolio position.

1.2.3 Step 3: Calculate the Relative Market Share

Market share is the percentage of the total market that is being catered to by your company,
measured either in revenue terms or unit volume terms.

We use Relative Market Share in a BCG matrix, comparing our product sales with the
leading rival’s sales for the same product.

Relative Market Share = Product’s sales this year/Leading rival’s sales this year

For example, if your competitor’s market share in the automobile industry was 25% and your
firm’s brand market share was 10% in the same year, your relative market share would be
only 0.4. Relative market share is given on the x-axis.

1.2.4 Step 4: Find Out The Market Growth Rate

The industry growth rate can be easily found through free online sources. It can also be
calculated by determining the average revenue growth of the leading firms. Market growth
rate is measured in percentage terms. Market growth rate is usually given by: (Product’s sales
this year – Product’s sales last year)/Product’s sales last year. Markets with high growth are
ones where the total market share available is expanding, so there’s a lot of opportunities for
all companies to make money.

1.2.5 Step 5: Draw the Circles On A Matrix

Having calculated above measures, now you need to just plot the brands on the matrix. The x-
axis shows the relative market share and the y-axis shows the industry growth rate. You can
plot a circle for each unit/brand/product, the size of which should ideally correspond to the
proportion of revenue generated by it.

1.3 How to Use a BCG Matrix?

Now that we have segregated the brands under four categories, let us see what strategies the
company should use for each:

1.3.1 Stars

Products located in this quadrant are attractive as they are located in a robust category and
these products are highly competitive in the category. There is huge potential for high
revenue growth since they have a high market share and a high growth rate. They may have

Page 7 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
been expensive to develop but are worth spending money on for promotion given the long
extent of their Product Life Cycle. If successful, a star will become a cash cow when the
category matures (assuming they maintain their relative market share). Yet, not all stars
become cash flows. This happens mainly in continuously changing industries, where even
innovative products can be displaced by new technological advancements, so a star becomes
a dog, instead of a cash cow.

1.3.2 Question Marks

Most businesses start off as question marks. These require huge investments to capture or
protect market share. Question marks have the potential to become stars and eventually cash
cows but can also become dogs or exit. Investments should be high for question marks
otherwise may produce negative cash flow.

Like stars, Question marks too may not always succeed and if even after large investment
they aren’t able to gain market share, they become dogs. Hence, very careful consideration is
required before making investment decisions in this category.

Strategic choices are Market penetration, market development, product development and
divestiture.

1.3.3 Cash Cows

They generate profits by investing as little cash as possible low-cost support) and need to be
managed for continued profits & cash flow. These are large corporates or SBUs that are
efficient in innovation and have the potential to become stars. Cash cows need to maintain a
strong market position and defend your market share. The company should take advantage of
sales volume and leverage the size of operations. Cash cows can also be used to support other
businesses.

Strategic choices are Product development and diversification

1.3.4 Dogs

Due to low market share, these products face cost disadvantages so they may generate
enough cash to break-even, but they are rarely, if ever, worth investing in. Unless a dog has
some other strategic aim, it should be liquidated if there are fewer prospects for it to gain
market share (there is Low scale of economies: so difficult to make a profit). These are
situated at a declining stage of the Product Life Cycle, therefore, the number of dogs in the
company should be minimized. A company should optimize its current operations. It should
get rid of all non-value added activities and features. It must then reposition the offering to
generate positive cash flow or sell this business.

Strategic choices are Retrenchment, divestiture and liquidation

Page 8 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.4 BCG Matrix of University

Figure 2 BCG Matrix of University

1.5 BCG Matrix for Industry

Figure 3 BCG Matrix Growth Share in Market

1.5.1 Stars of University

Which products or services grow the fastest and have the highest margins? You need to focus
on this and invest in it.

Page 9 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.5.2 Question Marks of University

Which products or services have the potential to become very large, for example because the
market is very large, but you only have a small market share? You have to choose: will it be a
dog or a star?

1.5.3 Cash Cows of University

Which products or services generate a good turnover in a stable way? How can you optimize
the profit from this?

1.5.4 Dogs of University

Which products or services do not grow or show a shrinkage and the market is also no longer
interesting, e.g. by competition? You must stop this!

1.6 BCG Matrix of Lucky Cement

Figure 4 BCG Matrix Strategy in Lucky Cement

1.7 BCG Matrix of Attock Refinery Limited

The BCG Matrix for Attock Refinery Limited Performance Management will help Attock
Refinery Limited Performance Management in implementing the business level strategies for
its business units. The analysis will first identify where the strategic business units of Attock
Refinery Limited Performance Management fall within the BCG Matrix for Attock Refinery
Limited Performance Management.

Page 10 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00

Figure 5 BCG Matrix of Attock Oil Refinery Limited

1.7.1 Stars of Attock Oil Refinery

The financial services strategic business unit is a star in the BCG matrix of Attock Refinery
Limited Performance Management. It operates in a market that shows potential in the future.
Attock Refinery Limited Performance Management earns a significant amount of its income
from this SBU. Attock Refinery Limited Performance Management should vertically
integrate by acquiring other firms in the supply chain. This will help it in earning more profits
as this Strategic business unit has potential.

The Number 1 brand Strategic business unit is a star in the BCG matrix of Attock Refinery
Limited Performance Management, and this is also the product that generates the greatest
sales amongst its product portfolio. The potential within this market is also high as consumers
are demanding this and similar types of products. Attock Refinery Limited Performance
Management should undergo a product development strategy for this SBU, where it develops
innovative features on this product through research and development. This will help Attock
Refinery Limited Performance Management by attracting more customers and increases its
sales.

The Number 2 brand Strategic business unit is a star in the BCG matrix of Attock Refinery
Limited Performance Management as Attock Refinery Limited Performance Management
has a 20% market share in this category. It also the market leader in this category. The overall
category is expected to grow at 5% in the next 5 years, which shows that the market growth
rate is expected to remain high. Attock Refinery Limited Performance Management should
use its current products to penetrate the market. This could be done by improving its
distributions that will help in reaching out to untapped areas. This will help increase the sales
of Attock Refinery Limited Performance Management.

Page 11 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.7.2 Cash Cows of Attock Oil Refinery

The supplier management service strategic business unit is a cash cow in the BCG matrix of
Attock Refinery Limited Performance Management. This has been in operation for over
decades and has earned Attock Refinery Limited Performance Management a significant
amount in revenue. The market share for Attock Refinery Limited Performance Management
is high, but the overall market is declining as companies manage their supplier themselves
rather than outsourcing it. The recommended strategy for Attock Refinery Limited
Performance Management is to stop further investment in this business and keep operating
this strategic business unit as long as its profitable.

The Number 3 brand strategic business unit is a cash cow in the BCG matrix of Attock
Refinery Limited Performance Management. This is an innovative product that has a market
share of 25% in its category. Attock Refinery Limited Performance Management is also the
market leader in this category. The overall category has been declining slowly in the past few
years. Attock Refinery Limited Performance Management has the power to influence the
market as well in this category. It should, therefore, invest in research and development so
that the brand could be innovated. This will help the category grow and will turn this cash
cow into a star. The overall benefit would be an increase in sales of Attock Refinery Limited
Performance Management.

The international food strategic business unit is a cash cow in the BCG matrix for Attock
Refinery Limited Performance Management. This business unit has a high market share of
30% within its category, but people are now inclined less towards international food. This
change in trends has led to a decline in the growth rate of the market. The recommended
strategy for Attock Refinery Limited Performance Management is to invest enough to keep
this strategic business unit under operations. If it no longer remains profitable and turns into a
dog, then Attock Refinery Limited Performance Management should divest this strategic
business unit.

1.7.3 Question Marks of Attock Oil Refinery

The local foods strategic business unit is a question mark in the BCG matrix for Attock
Refinery Limited Performance Management. The recent trends within the market show that
consumers are focusing more towards local foods. Therefore, this market is showing a high
market growth rate. However, Attock Refinery Limited Performance Management has a low
market share in this segment. The recommended strategy for Attock Refinery Limited
Performance Management is to invest in research and development to come up with
innovative features. This product development strategy will ensure that this strategic business
unit turns into a cash cow and brings profits for the company in the future.

The Number 4 brand strategic business unit is a question mark in the BCG matrix for Attock
Refinery Limited Performance Management. This strategic business unit is a part of a market
that is rapidly growing. However, this strategic business unit has been incurring losses in the
past few years. It has also failed in the attempts made at innovation by research and
development teams. The recommended strategy for Attock Refinery Limited Performance
Management is to divest and prevent any future losses from occurring.
Page 12 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
The confectionery strategic business unit is a question mark in the BCG matrix for Attock
Refinery Limited Performance Management. The confectionery market is an attractive
market that is growing over the years. However, Attock Refinery Limited Performance
Management has a low market share in this attractive market. The low sales are as a result of
low reach and poor distribution of Attock Refinery Limited Performance Management in this
segment. The recommended strategy for Attock Refinery Limited Performance Management
is to undergo market penetration, where it pushes to make its product present on more outlets.
This will ensure increased sales for Attock Refinery Limited Performance Management and
convert this strategic business unit into a cash cow.

1.7.4 Dogs of Attock Oil Refinery

The plastic bags strategic business unit is a dog in the BCG matrix of Attock Refinery
Limited Performance Management. This strategic business unit has been in the loss for the
last 5 years. It also operates in a market that is declining due to greater environmental
concerns. The recommended strategy for Attock Refinery Limited Performance Management
is to divest this strategic business unit and minimise its losses.

The Number 5 brand strategic business unit is a dog in the BCG matrix for Attock Refinery
Limited Performance Management. This is operating in a market segment that is declining in
the past 5 years. The company also has negative profits for this strategic business unit.
However, it is expected that the market will grow in the future with environmental changes
that are occurring. The recommended strategy for Attock Refinery Limited Performance
Management is to invest in the business enough to convert into a cash cow. This will ensure
profits for Attock Refinery Limited Performance Management if the market starts growing
again in the future.

The synthetic fibre products strategic business unit is a dog in the BCG matrix of Attock
Refinery Limited Performance Management. The market for such products has been
declining, and as a result of this decline, Attock Refinery Limited Performance Management
has been facing a loss in the past 3 years. The market share for it is also less than 5%. The
recommended strategy for Attock Refinery Limited Performance Management is to divest
this strategic business unit to minimise any further losses.

The artificially flavoured products strategic business unit is a dog in the BCG matrix for
Attock Refinery Limited Performance Management. These products were launched recently,
with the prediction that this segment would grow. However, with increasing health
consciousness, people are now refraining from consumption of artificial flavours. The market
is shrinking, and Attock Refinery Limited Performance Management has no significant
market share. The recommended strategy for Attock Refinery Limited Performance
Management is to call back this product.

Some of the strategic business units identified in the BCG matrix for Attock Refinery Limited
Performance Management have the potential of changing from their current classification.
For example, a dog changing to a cash cow. These have been identified in the BCG matrix of
Attock Refinery Limited Performance Management and recommended strategies to ensure
such change have also been made.
Page 13 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.8 BCG Matrix of Angro Foods

Figure 6 BCG Matrix of Angro Foods

1.9 BCG Matrix of Pizza Hut

The BCG Matrix for Pizza Hut will help Pizza Hut in implementing the business level
strategies for its business units. The analysis will first identify where the strategic business
units of Pizza Hut fall within the BCG Matrix for Pizza Hut.

Figure 7 BCG Matrix of Pizza Hut

1.9.1 Stars of Pizza Hut

Page 14 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
The financial services strategic business unit is a star in the BCG matrix of Pizza Hut. It
operates in a market that shows potential in the future. Pizza Hut earns a significant amount
of its income from this SBU. Pizza Hut should vertically integrate by acquiring other firms in
the supply chain. This will help it in earning more profits as this Strategic business unit has
potential.

The Number 1 brand Strategic business unit is a star in the BCG matrix of Pizza Hut, and this
is also the product that generates the greatest sales amongst its product portfolio. The
potential within this market is also high as consumers are demanding this and similar types of
products. Pizza Hut should undergo a product development strategy for this SBU, where it
develops innovative features on this product through research and development. This will
help Pizza Hut by attracting more customers and increases its sales.

The Number 2 brand Strategic business unit is a star in the BCG matrix of Pizza Hut as Pizza
Hut has a 20% market share in this category. It also the market leader in this category. The
overall category is expected to grow at 5% in the next 5 years, which shows that the market
growth rate is expected to remain high. Pizza Hut should use its current products to penetrate
the market. This could be done by improving its distributions that will help in reaching out to
untapped areas. This will help increase the sales of Pizza Hut.

1.9.2 Cash Cows of Pizza Hut

The supplier management service strategic business unit is a cash cow in the BCG matrix of
Pizza Hut. This has been in operation for over decades and has earned Pizza Hut a significant
amount in revenue. The market share for Pizza Hut is high, but the overall market is declining
as companies manage their supplier themselves rather than outsourcing it. The recommended
strategy for Pizza Hut is to stop further investment in this business and keep operating this
strategic business unit as long as its profitable.

The Number 3 brand strategic business unit is a cash cow in the BCG matrix of Pizza Hut.
This is an innovative product that has a market share of 25% in its category. Pizza Hut is also
the market leader in this category. The overall category has been declining slowly in the past
few years. Pizza Hut has the power to influence the market as well in this category. It should,
therefore, invest in research and development so that the brand could be innovated. This will
help the category grow and will turn this cash cow into a star. The overall benefit would be
an increase in sales of Pizza Hut.

The international food strategic business unit is a cash cow in the BCG matrix for Pizza Hut.
This business unit has a high market share of 30% within its category, but people are now
inclined less towards international food. This change in trends has led to a decline in the
growth rate of the market. The recommended strategy for Pizza Hut is to invest enough to
keep this strategic business unit under operations. If it no longer remains profitable and turns
into a dog, then Pizza Hut should divest this strategic business unit.

Page 15 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.9.3 Question Marks of Pizza Hut

The local foods strategic business unit is a question mark in the BCG matrix for Pizza Hut.
The recent trends within the market show that consumers are focusing more towards local
foods. Therefore, this market is showing a high market growth rate. However, Pizza Hut has
a low market share in this segment. The recommended strategy for Pizza Hut is to invest in
research and development to come up with innovative features. This product development
strategy will ensure that this strategic business unit turns into a cash cow and brings profits
for the company in the future.

The Number 4 brand strategic business unit is a question mark in the BCG matrix for Pizza
Hut. This strategic business unit is a part of a market that is rapidly growing. However, this
strategic business unit has been incurring losses in the past few years. It has also failed in the
attempts made at innovation by research and development teams. The recommended strategy
for Pizza Hut is to divest and prevent any future losses from occurring.

The confectionery strategic business unit is a question mark in the BCG matrix for Pizza Hut.
The confectionery market is an attractive market that is growing over the years. However,
Pizza Hut has a low market share in this attractive market. The low sales are as a result of low
reach and poor distribution of Pizza Hut in this segment. The recommended strategy for Pizza
Hut is to undergo market penetration, where it pushes to make its product present on more
outlets. This will ensure increased sales for Pizza Hut and convert this strategic business unit
into a cash cow.

1.9.4 Dogs of Pizza Hut

The plastic bags strategic business unit is a dog in the BCG matrix of Pizza Hut. This
strategic business unit has been in the loss for the last 5 years. It also operates in a market that
is declining due to greater environmental concerns. The recommended strategy for Pizza Hut
is to divest this strategic business unit and minimise its losses.

The Number 5 brand strategic business unit is a dog in the BCG matrix for Pizza Hut. This is
operating in a market segment that is declining in the past 5 years. The company also has
negative profits for this strategic business unit. However, it is expected that the market will
grow in the future with environmental changes that are occurring. The recommended strategy
for Pizza Hut is to invest in the business enough to convert into a cash cow. This will ensure
profits for Pizza Hut if the market starts growing again in the future.

The synthetic fibre products strategic business unit is a dog in the BCG matrix of Pizza Hut.
The market for such products has been declining, and as a result of this decline, Pizza Hut has
been facing a loss in the past 3 years. The market share for it is also less than 5%. The
recommended strategy for Pizza Hut is to divest this strategic business unit to minimise any
further losses.

The artificially flavoured products strategic business unit is a dog in the BCG matrix for
Pizza Hut. These products were launched recently, with the prediction that this segment
would grow. However, with increasing health consciousness, people are now refraining from

Page 16 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
consumption of artificial flavours. The market is shrinking, and Pizza Hut has no significant
market share. The recommended strategy for Pizza Hut is to call back this product.

Some of the strategic business units identified in the BCG matrix for Pizza Hut have the
potential of changing from their current classification. For example, a dog changing to a cash
cow. These have been identified in the BCG matrix of Pizza Hut and recommended strategies
to ensure such change have also been made.

1.10 BCG Matrix of McDonald’s

BCG matrix is four dimensional framework each dimension states the competitive position of
the company segments. McDonald divided its company operation in four geographical
segments, America, Europe, APMEA (Asia Pacific, Middle East, Africa geographical region)
and others.

Figure 8 BCG Matrix of McDonald's

1.10.1 Stars of McDonald’s

According to BCG framework stars are those segments which compete and operate in high
sales growth industry and have high market share. If the McDonald chain of restaurant is
evaluated in terms of geographical segment its Europe segment will come into the category of
stars. In 2015 and 2016 Europe segment has generated the highest revenue for the
corporation. Such segment requires market development and market penetration strategy to
evolve the segment into cash cow for long run financial sustainability.

1.10.2 Cash Cow of McDonald’s

Cash cows are those segments which provide financial stability in the organization. Such
segments compete in low sales growth industry and have high market share. McDonald
America segment reported 31% share of revenue, in corporation annual sales. However,
Page 17 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
McDonald America segment can be included in the cash cows category. As far as fast food
industry is concerned in America, competition is very tough, customers have many substitute
restaurant to replace, one with other and the food industry is stiff due to competition and high
frequency of new entrants. McDonald should include more products in to its menu, target
more segments and identify their needs of fine cuisine and satisfy them accordingly.

1.10.3 Question Mark of McDonald’s

APMEA segment of McDonald fall into the category of Question mark. Such segment
compete in high growth industry and have low market share. In Asian pacific countries,
industry sales growing potential is very high but unfortunately McDonald is not taking
advantage of this opportunity as; its competitor yum brands. Yum brands has been
establishing new franchise each day on average in mentioned region however, McDonald has
not been responding to the competitor strategy very well. McDonald APMEA segment
should formulate, market development and product development strategy. McDonald should
establish more franchises and introduced new products according to the needs of customers to
turn this segment in to star. Yum brands have competitive advantage over McDonald in this
segment.

1.10.4 Dogs of McDonald’s

Fortunately none of McDonald segment fall in to the category of dogs. Dogs are those
segments of company which are competing in low sales growth industry and have low market
share. Such segments are not good for the financial health of company or corporations.
Liquidation and retrenchment are the best suited strategies for dog segments.

1.11 Advantages of BCG Matrix

 It is simple and easy to understand.

 It helps you to quickly and simply screen the opportunities open to you, and helps you
think about how you can make the most of them.
 It is used to identify how corporate cash resources can best be used to maximize a
company’s future growth and profitability.
 The BCG Matrix produces a framework for allocating resources among different
products and makes it possible to compare the product portfolio at a glance.

1.12 Limitations of BCG Matrix

 BCG Matrix uses only two dimensions, relative market share and market growth rate.
These are not the only indicators of profitability, attractiveness or success.
 It neglects the effects of synergy between brands.
 Business with low market share can be profitable too.
 High market share does not always lead to high profits since there is also a high cost
that goes into getting a high market share.
 At times, dogs may help the business or other products in gaining competitive
advantage.
Page 18 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
 The model neglects small competitors that have fast-growing market shares.

Page 19 of 20
University of Wah,
Department of Chemical Engineering
Document No: UW/Ch.E/AF/REV00
1.13 References
1. Fancy BCG Matrix". Retrieved 22 February 2021.
2. Jump up to:a b Henderson, Bruce D. "The Product Portfolio". Retrieved 16 May 2013.
3. Jump up to:a b c d Pearce, John A. (2000). Strategic management : formulation,
implementation, and control. Robinson, Richard B. (Richard Braden), 1947- (7th ed.).
Boston: Irwin/McGraw-Hill. ISBN 0-07-229075-7. OCLC 41488602.
4. Henderson, Bruce. "The Product Portfolio". Retrieved 3 April 2013.
5. Competitor-oriented Objectives: The Myth of Market
Share http://cogprints.org/5196/1/myth_of_market_share.pdf See discussion on page
14.
6. J. Scott Armstrong and Roderick J. Brodie (1994). "Effects of portfolio planning
methods on decision making: experimental results" (PDF). International Journal of
Research in Marketing. 11 (1): 73–84. CiteSeerX 10.1.1.708.5557. doi:10.1016/0167-
8116(94)90035-3. Archived from the original (PDF) on 2010-06-20.
7. Duica, Andrea (July 2014). "The rise and fall of B.C.G.
Matrix" (PDF). PROCEEDINGS OF THE 8th INTERNATIONAL MANAGEMENT
CONFERENCE. 1: 3.
8. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of
management, 17(1), 99-120.
9. Barney, J. (2002). Gaining and Sustaining Competitive Advantage, 2nd ed. Prentice
Hall, Upper Saddle River, NJ.
10. Cardeal, N., & Antonio, N. S. (2012). Valuable, rare, inimitable resources and
organization (VRIO) resources or valuable, rare, inimitable resources (VRI)
capabilities: What leads to competitive advantage?
11. Hambrick, D. C., MacMillan, I. C., & Day, D. L. (1982). Strategic attributes and
performance in the BCG matrix—A PIMS-based analysis of industrial product
businesses. Academy of Management Journal, 25(3), 510-531.

Page 20 of 20