BCG PORTFOLIO BCG PORTFOLIO MATRIXMATRIX

A Study of BusinessesA Study of Businesses

THE MATRIXTHE MATRIX

Question MarksQuestion Marks StarsStars

DogsDogs Cash CowsCash Cows

STARSSTARS

Star SBUs have a high share of Market Star SBUs have a high share of Market growthgrowth

They require substantial amounts of They require substantial amounts of cash to support their growthcash to support their growth

Additional Growth potential and so Additional Growth potential and so profits can be ploughed back profits can be ploughed back

Appropriate strategy is to maintain the Appropriate strategy is to maintain the market share with large doses of market share with large doses of investment from inside and outsideinvestment from inside and outside

CASH COWSCASH COWS

These SBUs provide a lot of cash to These SBUs provide a lot of cash to the firmthe firm

They tend to generate more cash than They tend to generate more cash than is necessary to their market positionis necessary to their market position

They are often former StarsThey are often former Stars They can be ‘milked’ to provide funds They can be ‘milked’ to provide funds

for rikier and struggling businessesfor rikier and struggling businesses

QUESTION MARKSQUESTION MARKS

They have two other names ‘problem They have two other names ‘problem child’ and ‘wild cat’child’ and ‘wild cat’

This business is risky as there is This business is risky as there is already a leader in that businessalready a leader in that business

Requires a lot of funds to keep pace Requires a lot of funds to keep pace with the fast growing market – plants, with the fast growing market – plants, equipments, human resources etc.equipments, human resources etc.

They are ths called because before They are ths called because before every investment the firm has to think every investment the firm has to think whether to turn it into a star or quitwhether to turn it into a star or quit

DOGSDOGS

Have relatively small shares of the Have relatively small shares of the marketmarket

Barely support themselvesBarely support themselves May even be a drain on the May even be a drain on the

resources generated by the other resources generated by the other SBUsSBUs

Uually these dogs are harvested, Uually these dogs are harvested, divested, liquidated if turn around divested, liquidated if turn around is not possibleis not possible

BALANCED PORTFOLIOBALANCED PORTFOLIO

Has a number of stars and cash cowsHas a number of stars and cash cows Not too many question marks or dogsNot too many question marks or dogs Heavily invest in stars- high market Heavily invest in stars- high market

share and high growth rate means share and high growth rate means higher probability of successhigher probability of success

Maintain cash cows because they Maintain cash cows because they provide resources for future provide resources for future investments in stars and wild catsinvestments in stars and wild cats

BALANCED PORTFOLIOBALANCED PORTFOLIO

Use selective resource allocation to Use selective resource allocation to convert wild cats into starsconvert wild cats into stars

Liquidate or divest dogs as they are Liquidate or divest dogs as they are not worth any investmentnot worth any investment

As time passes SBUs change their As time passes SBUs change their positions in the matrixpositions in the matrix

Successful SBUs have a life cycleSuccessful SBUs have a life cycle Companies watch their current and Companies watch their current and

moving positions bothmoving positions both

USUAL MISTAKESUSUAL MISTAKES

Leaving cash cows with too little in Leaving cash cows with too little in retained funds which weakens themretained funds which weakens them

Leaving too much in retained funds in Leaving too much in retained funds in cash cows means the company is not cash cows means the company is not investing enough in new growth investing enough in new growth businessesbusinesses

Making major investments in dogs with Making major investments in dogs with the forlorn hope of turning them into the forlorn hope of turning them into starsstars

Kotler’s View- do not have too many Kotler’s View- do not have too many question marks while under investing in question marks while under investing in them them

SHORTCOMINGS OF SHORTCOMINGS OF THE MATRIXTHE MATRIX Do not address directly the majority of Do not address directly the majority of

the businesses that have average the businesses that have average market share in markets of average market share in markets of average growthgrowth

The matrix talks of high or low market The matrix talks of high or low market sharesshares

Generalisations from the matrix do not Generalisations from the matrix do not cover SBUs which may have low market cover SBUs which may have low market shares but are not question marks shares but are not question marks

SHORTCOMINGS OF SHORTCOMINGS OF THE MATRIXTHE MATRIX Ford Ikon and Mitsubishi Lancers would Ford Ikon and Mitsubishi Lancers would

not raise car production without careful not raise car production without careful debate to sustain their exclusive imagedebate to sustain their exclusive image

Businesses with large market shares in Businesses with large market shares in slw growth markets may not necessarily slw growth markets may not necessarily be cash cows as they require be cash cows as they require substantial investments to retain their substantial investments to retain their position- Lever’s toilet soaps with more position- Lever’s toilet soaps with more than 60% market sharethan 60% market share

SHORTCOMINGS OF SHORTCOMINGS OF THE MATRIXTHE MATRIX The matrix does not provide The matrix does not provide

guidelines for which question guidelines for which question marks to invest in and which dogs marks to invest in and which dogs to salvage/divestto salvage/divest

The data to position the SBUs in The data to position the SBUs in the matrix may not always be the matrix may not always be availableavailable