BCG PORTFOLIO MATRIX

A Study of Businesses

THE MATRIX
Question Marks Stars

Dogs

Cash Cows

STARS

Star SBUs have a high share of Market growth They require substantial amounts of cash to support their growth Additional Growth potential and so profits can be ploughed back Appropriate strategy is to maintain the market share with large doses of investment from inside and outside

CASH COWS

These SBUs provide a lot of cash to the firm They tend to generate more cash than is necessary to their market position They are often former Stars They can be milked to provide funds for rikier and struggling businesses

QUESTION MARKS

They have two other names problem child and wild cat This business is risky as there is already a leader in that business Requires a lot of funds to keep pace with the fast growing market plants, equipments, human resources etc. They are ths called because before every investment the firm has to think whether to turn it into a star or quit

DOGS

Have relatively small shares of the market Barely support themselves May even be a drain on the resources generated by the other SBUs Uually these dogs are harvested, divested, liquidated if turn around is not possible

BALANCED PORTFOLIO

Has a number of stars and cash cows Not too many question marks or dogs Heavily invest in stars- high market share and high growth rate means higher probability of success Maintain cash cows because they provide resources for future investments in stars and wild cats

BALANCED PORTFOLIO

Use selective resource allocation to convert wild cats into stars Liquidate or divest dogs as they are not worth any investment As time passes SBUs change their positions in the matrix Successful SBUs have a life cycle Companies watch their current and moving positions both

USUAL MISTAKES

Leaving cash cows with too little in retained funds which weakens them Leaving too much in retained funds in cash cows means the company is not investing enough in new growth businesses Making major investments in dogs with the forlorn hope of turning them into stars Kotlers View- do not have too many question marks while under investing in them

SHORTCOMINGS OF THE MATRIX

Do not address directly the majority of the businesses that have average market share in markets of average growth The matrix talks of high or low market shares Generalisations from the matrix do not cover SBUs which may have low market shares but are not question marks

SHORTCOMINGS OF THE MATRIX

Ford Ikon and Mitsubishi Lancers would not raise car production without careful debate to sustain their exclusive image Businesses with large market shares in slw growth markets may not necessarily be cash cows as they require substantial investments to retain their position- Levers toilet soaps with more than 60% market share

SHORTCOMINGS OF THE MATRIX

The matrix does not provide guidelines for which question marks to invest in and which dogs to salvage/divest The data to position the SBUs in the matrix may not always be available