BCG

In regard to my question above, could you please explain how we can determine if the product is problematic child, star, cash cow or dog based on the information from income statements below? year 1 year 2 year 3 % in total Volume product 1 18,000.00 17,500.00 16,500.00 29% 8% product 2 27,000.00 26,200.00 25,000.00 45% 7% product 3 11,000.00 11,500.00 11,750.00 21% -7% product 4 2,800.00 2,800.00 2,700.00 5% 4% Total 58,800.00 58,000.00 55,950.00 Direct cost product 1 2,070.00 2,187.00 2,145.00 20% -4% product 2 2,160.00 2,096.00 2,075.00 19% 4% product 3 4,950.00 5,750.00 6,227.00 57% -26% product 4 756.00 840.00 837.00 8% -11% Total 9,936.00 10,873.00 11,284.00 Revenue product 1 2,610.00 2,625.00 2,475.00 18% 5% product 2 2,430.00 2,227.00 2,125.00 16% 13% product 3 6,875.00 7,475.00 7,931.00 59% -15% product 4 910.00 980.00 945.00 7% -4% 12,825.00 13,307.00 13,476.00 indirect cost Distribution 175.00 200.00 250.00 17% -43% Promotion 300.00 280.00 240.00 16% 20% Amin cost 750.00 850.00 1,000.00 67%-33% 1,225.00 1,330.00 1,490.00 -22%

Cost and indirect cost have nothing to do with it. You have to see how the total market size is changing and how market share is changing (market share = our revenue for that product/total market revenue for that product). No market informatoin has been supplied in the figures above as far as I can see, so BCG is not possible.

Thank you for your reply. The information above is copied from the question 46 " The Ace Bicycle Company" from BPP revision kit, and according to the solution the BCG approach is useful for approaching this question. However, i am totally confused with the solution and not sure how to link the information from the income statement to BCG matrix.

In their introductin BPP says that BCG would be useful, but their answer then does not make huge use of that. It concentrates more on differentiation/cost leadership/focus and life cycle. It does mention that racing bikes are cash cows, but I'm not sure how they come to that conclusion as there is no information about market growth rate -which might be high. Similarly, it calls standard bicycles dogs - but with no particular evidence. With regard to what they should do, for example: Racing bikes: forecast contribution/unit = (7931.25 - 6227.5/11750 = $145 High profits here because of their specialist nature (differentiation) Basic bikes: forecast contribution/unit = (2125-2015)/25000 = $4.40 - a bit of a waste of time. Low contribution here because of their generic nature and overseas competition and they fail to get their costs down.

Many thanks, the solution seems more understandable now :)

Hello sir Can you help me in June 2014 question 2 (a)?? How did they get the total cost ,for example 2,250 here whereas I get 2,190?Can you help me to calculate the total cost please? And in pricing startegy,in BPP,it said that there is no strategic approaches like skimming,penetration,product-line. I found related product pricing.Isn't it relevant here??

450 x 3 + 250 x 3 + 20 x 3 (manual) + 10 x 3 x 3 (food) = 2250

Sir In past paper 12/10 shoal plc question in bbp q40 Why bsg was not applied on sbu shoal farm. Thanks in advance

I can't answer for BPP and haven't looked at their answer, but the ACCA answer did use BCG for ShoalFarm: "ShoalFarm may also have a significant role to play in providing raw materials for both ShoalPro and the potential acquisition– Captain Haddock restaurants. In terms of the Boston Box classification, ShoalFarm is probably a question mark or problem child." https://upload.news.esnai.com/2012/0825/1345864107497.pdf

Thanks sir but I am confused why it is child

Small market share, high growth rate