Formulation of BCG Index (BCGI): An empirical study on Wal-Mart and Amazon (1999 – 2018)

What is it about?

This research paper’s objectives are two-fold: First, to test whether there is a statistically significant correlation between Market Growth Rate and Relative Market Share of the Market Leader and its ‘nearest’ rival / ‘follower’, and if so, to classify them accordingly and test their natures of risk – aversion; and Second, to formulate a BCG Index (BCGI) by means of two statistically correlated variables for estimating their respective BCG Index Areas (BCGIA) to perform a comparative analysis. In order to serve the purposes, an empirical time – series study of 20 years has been conducted on Wal-Mart and Amazon; the leader and its closest follower in the Wholesale market segment since they are ranked First and Fifth respectively in terms of revenue as per Fortune Global 500 list.

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Why is it important?

The primary motive of this research work was to empirically test the feasibility of the BCG Matrix in a simplified manner. To serve this purpose, a BCG Index (BCGI) was formulated with two global major firms (Wal-Mart and Amazon) following a heuristic method. The estimation of BCG Index Areas (BCGIA) for Wal-Mart and Amazon was an eventual follow – up procedure. However, the major issues which influenced this study most were obviously how those two firms would ‘behave’ in terms of risk – taking in the short and long run and how to technically ‘classify’ those firms along with the other firms in the industry according to the four ‘fundamental’ categories of ‘Star’, ‘Cash Cow’, ‘Question Mark’, and ‘Dog’ respectively.

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