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BCG Matrix of Nestle | BCG Matrix Analysis of NESTLE

BCG Matrix of Nestle

BCG Matrix also known as the growth-share matrix is used by organizations to classify their business units or products into 4 different categories: Dogs, Stars, Cash Cows and Question Mark.

Growth rate of an industry and the market share of a respective business relative to the largest competitor present in the industry are taken as the basis for the classifications, for that reason, BCG Matrix is also called as Growth-Share Matrix.

Dogs

These are the products with low growth or market share

These are low growth or low market share products and have very few chances of showing any growth.

The investment strategy for these products has to be very well thought through by the management as there are chances that these businesses might not yield any profit for the organization.

These business units or products are cash traps and therefore are not seen as a useful source of earning.

Cash Cows

These are the products which are in low growth markets with high market share.

Products which are market leaders in their specific industry and their industry is not expected to see any major growth in the future are considered as Cash Cows.

These products are the money churners for the company and require very low investments to sustain their leadership and profitability in the market.

Star

These are the products which are in high growth markets with a high market share.

Products or Business Units which hold a high market share and are also considered to grow in the future are positioned as Stars.

As a result, companies are interested to invest in developing these units further to gain a larger market share and attain a stronger position in the market.

These products have the potential of being positioned as cash cows in the future owing to the industry growth prospects.

Question Mark

Products in high growth markets with a low market share.

Products or business units of the company that are still in the nascent stage of their product lifecycle and can either become a revenue generator by taking the position of a Star or can become a loss-making machine for the company in the future.

The industry has high potential to grow hence giving the room to the products to grow as well only if the pertinent issues are managed effectively.

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Let’s check out the BCG Matrix of Nestle and what products of the company fall under what Quadrant.

Cash Cows:

Cashcows are the products that have a high market share in a market that has low growth. For Nestle, there is one product that has undoubtedly been the Cash Cow and its Nestle’s Maggi Noddles.

With a market share of 80-85 %, Maggi Noddles holds a very strong hold in the market and have high customer loyalty.

The product requires very less investment to maintain its market share and fight off any competition.

Stars:

The products or business units that have a high market share in high growth industry are the stars of the organization. In the case of Nestle, Nestle’s Mineral Water and Nestle’s Nescafe Coffee fall in the Star quadrant of the BCG Matrix of Nestle.

Growing healthier lifestyle trends and emerging markets have prompted the brand to invest large amounts of investments in order to differentiate the bottled water brands from competitors in mature markets and grow brand awareness in emerging markets.

Question Mark:

There are products that formulate a part of the industry that is still in the phase of development, yet the organization has not been able to create a significant position in that industry. The small market share obtained by the organization makes the future outlook for the product uncertain, therefore investing in such domains is seen as a high-risk decision.

With increasing competition and growing need to consume healthy products among consumers, Nestle’s Milk products and Nutrition requires significant investment from the brand to maintain and grow its market share.

Nestle’s Chocolates and confectionaries is another business unit that can be placed in the Question Mark quadrant of the BCG Matrix of Nestle. High competition and small market share of the product in the industry is what makes it place in this quadrant.

Dogs:

Dogs are those products that were perceived to have the potential to grow but however failed to create magic due to the slow market growth.

Failure to deliver the expected results makes the product a source of loss for the organization, propelling the management to withdraw future investment in the venture. Since the product is not expected to bring in any significant capital, future investment is seen as a wastage of company resources, which could be invested in a Question mark or Star category instead.

Nestle’s Milo was launched as chocolate and malt powder for Milk and water, however, the product failed to create any significant impact on the business and is placed in the Dog Quadrant of BCG Matrix of Nestle.

This concludes the article on the BCG Matrix of Nestle