BCG Matrix of Nestle
Boston Consulting Group Matrix also known as growth share matrix. Nestle using this method to categorise their products into four groups which are the star, question mark, cash cow, and dogs according to the market growth and market share.
The strategic business unit (SBU) that are as seen as question mark are those who have the high market growth but low market share. MAGGI 2-minute Noodle had classified into question mark because it has high market growth and low market share. MAGGI 2-minute Noodle consumes a lot of money however bring less in revenue. In the end, they unable to achieve the goals that are set in the high potential offered by the industry or even lose money. Here is a new in 2015, because of the bad news about Nestle Maggi had led to the sale decrease. The MAGGI 2-minute Noodle has a bad reputation for violating food safety laws because it is believed to contain large amounts of lead. Because of this news, MAGGI 2-minute Noodle had lost 80% market share (HT Media Ltd. 2018). MAGGI 2-minute Noodle had to bear significant losses due to the recall of MAGGI 2-minute Noodle products on the market.
Star’s industry has high growth rate and is still in the development stage. Nestle had launched a brand for people who were living an healthy life style. The brand name is Nestle pure life. In BCG Matrix, mineral water packaged by Nestle is at star because it has high market share and the high potential of growing into high market share. In the competitive business environment, mineral water can generate a lot of cash but it also consumes a lot of investment in order to differentiate from other competitors and maintain their own growth. Nowadays, the Nestle pure life is being supplied to 40 counties across the world currently (Nestle, 2018). Thus, we can see that mineral water produced by Nestle may gain a larger market share in the next few years as more and more consumers buy the mineral water. It has the potential for growth in the emerging markets and become cash cow in the next few years.
Cash cow is the business unit that have high market share, but the growth rate is slow. It is because the market has grown maturity. The brand Nesquik can be identified as cash cow. It is because Nesquik is one of the world’s leading milk flavour brands. Due to the large market share, even though the slowdown of market growth, Nesquik continue to earn revenue for the Nestle. Nesquik can make more cash then they consume. Nesquik was the world’s largest brand with $850 million in retail sales in 2014 (Euromonitor 2018). Nestle advised to invest Nesquik to keep the current level of productivity.
Dogs are the strategic business units (SBUs) have low market share and low market growth. This business unit may not earning or not consume a large amount of cash, so the organisation may not interesting or deciding to remain the future investment in them. Nestle had introduced a product named Powerbar. Powerbar is sport nutrition brand and other related products including sports drinks, gels, and the Pria bars targeted at women. Nestle expected Powerbar may earn market share in the future, but it unable to achieved the expected level of result. Powerbar did not shown significant growth chances in the future, thus powerbar are major candidates for divestiture. (Marci Martin 2018)
HT Media Ltd., 2018, ‘The Maggi ban: How India’s favourite two-minute noodles lost 80% market share’, viewed 12/11/2018, <https://www.livemint.com/Companies/1JKHsutTXLWtTcVwdIDg0H/The-Maggi-ban-How-Indias-favourite-twominute-noodles-lost.html>.
Nestle Water, 2018, ‘Nestle Pure Life’, viewed 11/11/2018, <https://www.nestle-waters.com/brands/nestle-pure-life>.
Euromonitor is privately owned & trademarked, 2018, ‘Overview of World’s Chocolate Powder Drinks Market and Toddy’s Evolution’, viewed 12/11/2018, <https://blog.euromonitor.com/overview-of-worlds-chocolate-powder-drinks-market-and-toddys-evolution/>.
Martin, 2018, ‘What Is A BCG Matrix’, viewed 13/11/2018, <https://www.businessnewsdaily.com/5693-bcg-matrix.html>.