Introduction

Why?

For public companies, the main purpose of cost controlling is to increase share/stock value.

How?

• Incrase revenue (sales)
• Decrease costs (expenses) => COST CONTROLLING

Product Lifecycle

BCG Matrix

Components

Relative Market Share

Relative Market share is the ratio of a company's market share to the market share of its largest competitor.

If we have the following companies:

• Company A: 30% market share
• Company B: 20% market share
• Company C: 5% market share

Then, the RMS are the following:

• RMS of Company A: $\frac{\text{Company A}}{\text{Company B}} = \frac{30}{20} = 1.5$
• RMS of Company B: $\frac{\text{Company B}}{\text{Company A}} = \frac{20}{30} = 0.66$
• RMS of Company C: $\frac{\text{Company C}}{\text{Company B}} = \frac{5}{20} = 0.25$

Question Mark

• High growth
• Low market share
• High investement: requires investments to sustain growth
• High Cost: high cost due to the high growth

Stars

• high market share
• high market growth
• high profit
• high investment

Cash Cows

• high market share
• low market growth
• high profit
• low investment = no need for investements

Dogs

• low market share
• low market growth
• low profit
• low investment

Critical Path

Worst Path

Cash Flow

Cash Flow is the net amount of cash and cash-equivalents being transferred into and out of a business.

Timeline

Net Present Value (NPV)

Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

BCG Matrix

Question Mark

Net Present Value is negative because product needed high investement for research and development and needs more investement to sustain growth.

Stars

Net Present Value is positive because product is profitable and needs more investement to sustain growth.

Cash Cows

Net Present Value is positive because product is profitable and doesn't need more investement to sustain growth.

Metrics

Index of Consumption

The Index of Consumption is the ratio at which a product is consumed in a specific geographic area.

Numerical Distribution

The Numerical Distribution is the ratio of the number of outlets that sell a product in a specific geographic area to the total number of outlets in that area.

Value Distribution

The Value Distribution is the ratio of the value of sales of a product in a specific geographic area to the total value of sales in that area.

Example

• More consumption in Area B (200) than Area A (100)
• More outlets selling product in Area A (50%) than Area B (20%)
• More value of sales in Area B (40%) than Area A (10%)
• Area B is the best area to invest in because it has more consumption, less outlets (less selling costs) and more value of sales.