Reliance BCG Matrix-Emmanuel

BCG Matrix Analysis of  Reliance Presented by Nwankwo Emmanuel

Main Subsidiaries • Reliance Telecommunication Limited (RTL) • Reliance Globalcom • Reliance Communications Infrastructure Limited (RCIL) • Reliance Big TV Limited

• Reliance Infratel Limited(RITL)

Why BCG Matrix Three techniques most widely used and most referenced in the business literature: BCG-Growth Share Matrix GE-McKinsey Industry Attractiveness-Business Strength Matrix Arthur D. Little Life Cycle Approach The BCG matrix method is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit.

Stars

Question Marks

?

$ Cash Cows

Dogs

4 categories in a portfolio of a company 1. Stars (=high growth, high market share)

2. Cash Cows (=low growth, high market share)

• use large amounts of cash and are

•  profits and cash generation

leaders in the business so they should also generate large amounts of cash.

• frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept.

should be high , and because of the low growth, investments needed should  be low. Keep profits high.

• Foundation of a company.

4 categories in a portfolio of a company (cont’d) 3. Dogs (=low growth, low market share) • avoid and minimize the number of dogs in a company.

• beware of expensive ‘turn around plans’. • deliver cash, otherwise liquidate. • divest, but occasionally hold for possible strategic repositioning, which can lead to question mark or cash cow.

4. Question Marks (= high growth, low market worstshare) cash characteristics of all,

•

because high demands and low returns due to low market share. • generate insufficient cash, simply absorb great amounts of  cash and later, as the growth stops, a dog. • either invest heavily or sell off  or invest nothing and generate whatever cash it can. Increase market share or deliver cash.

The two dimensional analysis of BCG Matrix The BCG or Growth-Share matrix imposes a two-dimensional analysis on management of Strategic Business Units: a comparative analysis of business strength and an assessment of the environment. The business strength measure is the business's Relative Market Share. The environmental measure is the Market Growth Rate. Formulas for Relative Market Share and Market Growth Rate:

Indian mobile mkt 2010 Service Provider

Subscriber (Mn)

Market Share (%)

Relative Market Share

Bharti Airtel

130.61

21.73

1.243

Reliance Com + RTL

105.15

17.49

0.805

Vodafone Essar

103.75

17.26

0.794

BSNL

70.62

11.75

0.541

Tata Teleservices

67.88

11.29

0.520

IDEA

65.28

10.86

0.500

Aircel

38.46

6.40

0.295

MTNL

5.12

0.85

0.039

Uninor

5.02

0.84

0.039

Sistema Shyam

4.21

0.70

0.032

Loop Mobile

2.89

0.48

0.022

STel

1.11

0.19

0.009

Videocon

0.65

0.11

0.005

HFCL Infotel

0.327

0.06

0.003

Etisalat/Allianz

0.004

0.00

0.000

overall telecom operator market share

India Wireless Operators Revenue Market Share

•Bharti Airtel 32% •Vodafone 20.8% [Consistent] •Idea Cellular 12.7% [Moderate Growth, but commendable] •Reliance Communications -11.7% [ Losing to competition ] •BSNL 9.3% [ Losing to competition] •Tata Tele [ Gaining on the back of DoCoMo ’s innovative strategies •Aircel 4%

India Wireless Connection (2010)  Telecom Operator

Market Share Relative Market Share

Bharti Airtel

32.0%

2.735

RCOM

11.7%

0.366

Vodafone

20.8%

0.650

BSNL

9.3%

0.291

IDEA Cellular

12.7%

0.397

8.5%

0.266

4.0%

0.125

 Tata  Teleservices Aircel

Top CDMA operators in India

Telecom Marke Relative Operator t Market Share Share (in %) MTS (SSTL)1.0%

0.017

RCOM

56.0% 1.514

MTNL

0.0%

0.000

BSNL

6.0%

0.107

HFCL

0.0%

0.000

 Tata 37.0% 0.661  Teleservice s

BCG Analysis for Reliance Communications 20%18%16%14%12%10%8%6%4%2%0%10x

8x 7x

5x

3x

1x

.7x

.5x .4x . 3x .2x .1x

Strategy for substantial growth

Stars

Question Marks

?

$ Cash Cows

Dogs

Cash reinvestment

Stars

Question Marks

?

$ Cash Cows

Dogs

BCG Matrix ( Three Paths to Success) • Continuously generate cash cows and use the cash surplus from the cash cows to invest in the question marks that are not selfsustaining. • Reinvest in Stars, as the market matures, stars will degenerate into cash cows and the process will be repeated. • Segment the market for dogs, nurse the dogs to health or manage for cash.

Three Paths to Success

Stars

Question Marks

?

$ Cash Cows

Dogs

BCG Matrix ( Three Paths to Failure) • Over invest in cash cows and under invest in question marks. • Under invest in the stars. • Over milk the cash cows.

Three Paths to Failure

Stars

Question Marks

?

$ Cash Cows

Dogs

 The 4 Portfolio Strategies

limitations of the BCG Matrix 1. 2. 3. 4. 5.

High market share is not the only success factor  Market growth is not the only indicator for attractiveness of a market Sometimes Dogs can earn even more cash as Cash Cows How growth and share are measured highly affect the overall analysis. It does not provide sufficient direction for most effective ways to implement the investment strategies. Recommendation: Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become a cash cow (or star), or otherwise companies are advised to disinvest and try to get whatever possible cash out of the question marks that were not selected.

references 1. 2. 3. 4. 5. 6. 7.

http://www.bcg.com/about_bcg/history/history_1968.aspx http://www.rcom.co.in http://www.simonbrandon.com http://www.telecomindiaonline.com/india-telecom-growth-and-subscribers-2010.html http://www.thehindubusinessline.com/2010/05/22/stories/2010052252590700.htm. http://www.businessweek.com/globalbiz http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/740/PRelease28June10 .pdf  8. http://www.ibef.org/industry/telecommunications.aspx. 9. http://en.wikipedia.org/wiki/Reliance_Communications 10. http://economictimes.indiatimes.com/News/News-By-Industry/Telecom/GSM-CDMAplayers-maintain-subscriber-growth-momentum/articleshow/4281903.cms 11. Carl W. Stern, George Stalk - Perspectives on Strategy from The Boston Consulting  Group