Limitations
 of the BCG model Essay

The BCG model is criticised for having a number of limitations (Kotler 2003 McDonald 2003)There ar other reasons other than relative food market place sh are and market ingathering that could influence the allocation of resources to a product or SBU reasons such as the need for strong brand name and product positioning could compel resource allocation to an SBU or product (Drummond & Ensor 2004).What is more, the model rests on wage cash consumption or generation as the fundamental portfolio rapprochement criterion. That is appropriate only in a capital constrained environment. In modern economies, with relatively frictionless capital flows, this is not the appropriate careful to apply rather, risk-adjusted discounted cash flows should be used (ManyWorlds 2005).Also, the matrix assumes products/business units are independent of each other, and independent of assets outside of the business. In other words, in that respect is no provision for synergy among products/business un its. This is rarely realistic.The relationship between cash flow and market share whitethorn be fallible imputable to a number of factors including (Cipher 2006) competitors may have access to take down cost materials unrelated to their relative share position low market share growrs may be on steeper experience curves due to superior production technology and strategic factors other than relative market share may affect make margins.In addition, the growth-share matrix is ground on the assumption that high rates of growth use macroscopic cash resources and that maturity of the life cycle brings about the expected profit returns. This may be incorrect due to various reasons (Cipher 2006) capital flashiness may be low and the business/product could be crowing without major cash outlay high entry barriers may live so margins may be sustainable and big enough to produce a positive cash flow and a growth at the same time and industry overcapacity and price competition may unho rse prices in maturity.Furthermore, market growth is not the only factor or necessarily the most important factor when assessing the attractiveness of a market. A fast growing market is not necessarily an attractive one. proceeds markets attract new entrants and if capacity exceeds demand then the market may become a low margin one and therefore unattractive. A high growth market may lack size and stability. abandoned the aforementioned weaknesses, the BCG Growth-Share matrix must be used with care nonetheless, it is a best-known business portfolio evaluation model (Kotler 2003).