BCG matrix

The BCG matrix is a methodology that analyzes a portfolio of divisions or businesses based on two inputs, namely market growth and market share, and then draws conclusions about how resources like talent and investment should be properly distributed across the portfolio. The basic presumptions or principles regarding the BCG growth-share matrix are as follows.

Higher returns on investment are a result of greater market share. If you have a large market share, you are likely to have a greater competitive advantage in the market. This could be due to economies of scale or experience curve implications (Marmol 21). Another concept is that higher growth markets result in more attractive returns on the investment. This can be true since to grow you are attracting the business of new customers, which is easier than taking the existing customers from a close competitor and since your investment in your position will rise with the market, resulting in better future returns as compared to those in a shrinking market.

Also, we have well-defined markets that can be quite tricky. For example is Europe a one market segment or not? Think about India at large. This tends to be quite complicated. If you have to define markets differently, businesses could shift from Dog to Star or vice versa, with very different portfolio allocation effects.

Besides, each segment of the portfolio has the same resource or return dynamics that can be genuinely allocated across the portfolio. This assumption may not be true because it is not possible to allocate talent across businesses organization. Finally, resources are limited in supply (Marmol 34). Trade-offs are supposed to be made across the entire portfolio, otherwise one can just invest in them all at ago.

These concepts are valid because they are based on reasonable economic truth. The BCG matrix is a good set off point for resource allocation decisions across a portfolio. It is versatile, that is it can be used for the portfolio of business units, products, and market segments. Its popularity and easier understanding make it an important communication tool that is used to explain difficult resource allocation decisions to business units. It is also subjected to objective data. This makes it difficult to challenge and thus useful as a tool to push through tough decisions (Miller et al. 28).

However, the main danger of this matrix is that this outline is too simplistic and clear, determining main strategic decisions while not considering other factors. For instance, when a low growth, high share business comes after a "cash cow" approach it can become a self-fulfilling prophecy. Inadequate investment in innovation can be exactly what is clawing growth back. By use of alternative axes such as competitive position can alter for this, but results into more subjective judgment.

Question 2

The major business driver that makes most companies outsource some of its activities is finance. An external supplier may be able to provide services at a slightly lower cost than internal operation cost. To make this decision, managers should be able to quantify the exact costs of a particular process or product (Wheelen et al. 164). This starts with maintaining accurate measurements of volume, labor, and materials. A corporation should outsource if it has a distinctive competency in a particular functional area, that area would be the foundation for outsourcing.

The following are factors to consider when deciding whether outsourcing is right for your company or business. The activity is not central to generating income or competitive success. Outsourcing of a central activity may expose the company financial information that may be leaked to a competitor or may even be subjected to misappropriation of funds. Secondly, the job is a regular one that wastes valuable time and energy (Miller 17). Outsourcing will reduce the wastes and energy that will otherwise be invested in other important activities of the corporation. Thirdly, the task is a need that is only temporary or that reoccurs in cycles. Also, the function outsourced should be less expensive to have other parties do it than to do it internally. The activity can be done cheaply in-house but drains resources that could be better used elsewhere.

In conclusion, the skill required in carrying out that task is so specialized that it's impractical to have a regular employee internally do it (Miller 17). This becomes the necessary circumstances under which a corporation can outsource.

Works Cited

Marmol, Thomas . The BCG Growth-Share Matrix: Theory and Applications. The Key to

Portfolio Management . Plurilingua Publishing, 2015.

Miller, Frederic P, Agnes F. Vandome, and John McBrewster. Growth-share Matrix: Boston

Consulting Group, Corporation, Business, Product Lining, Brand, Product

Management, Strategic Management, Portfolio (finance). Alphascript Publishing,

2010.

Wheelen, Thomas L., Hunger, J. David, Hoffman, Alan N., and Bamford, Charles E.

Strategic Management and Business Policy: Toward Global Sustainability. Pearson

Education, 2015.