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    BCG Box

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    kitson200
    The Boston Consulting Group box is a portfolio planning method that classifies business strategic business units (SBUs) based on their relative market share and market growth rate. SBUs that are high growth and have high relative market share are classified as "Stars". Mature SBUs with high relative market share but low growth are "Cash Cows". SBUs with low relative market share but operate in high growth markets are "Question Marks". SBUs with low relative market share and low growth are "Dogs". The BCG box is used to determine the strategic approach for each SBU - whether to build, hold, harvest, or divest the business.

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    BCG Box

    Uploaded by

    kitson200
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    The Boston Consulting Group box is a portfolio planning method that classifies business strategic business units (SBUs) based on their relative market share and market growth rate. SBUs that are high growth and have high relative market share are classified as "Stars". Mature SBUs with high relative market share but low growth are "Cash Cows". SBUs with low relative market share but operate in high growth markets are "Question Marks". SBUs with low relative market share and low growth are "Dogs". The BCG box is used to determine the strategic approach for each SBU - whether to build, hold, harvest, or divest the business.

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    The Boston Consulting Group box is a portfolio planning method that classifies business strategic business units (SBUs) based on their relative market share and market growth rate. SBUs that are high growth and have high relative market share are classified as "Stars". Mature SBUs with high relative market share but low growth are "Cash Cows". SBUs with low relative market share but operate in high growth markets are "Question Marks". SBUs with low relative market share and low growth are "Dogs". The BCG box is used to determine the strategic approach for each SBU - whether to build, hold, harvest, or divest the business.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    35 views2 pages

    BCG Box

    Uploaded by

    kitson200
    The Boston Consulting Group box is a portfolio planning method that classifies business strategic business units (SBUs) based on their relative market share and market growth rate. SBUs that are high growth and have high relative market share are classified as "Stars". Mature SBUs with high relative market share but low growth are "Cash Cows". SBUs with low relative market share but operate in high growth markets are "Question Marks". SBUs with low relative market share and low growth are "Dogs". The BCG box is used to determine the strategic approach for each SBU - whether to build, hold, harvest, or divest the business.

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    Product portfolio strategy - introduction to the boston consulting box

    Introduction The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must: (1) Analyse its current business portfolio and decide which businesses should receive more or less investment, and (2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. Methods of Portfolio Planning The two best-known portfolio planning methods are from the Boston Consulting Group (the subject of this revision note) and by General Electric/Shell. In each method, the first step is to identify the various Strategic Business Units ("SBU's") in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organised. The Boston Consulting Group Box ("BCG Box")

    Using the BCG Box (an example is illustrated above) a company classifies all its SBU's according to two dimensions: On the horizontal axis: relative market share - this serves as a measure of SBU strength in the market On the vertical axis: market growth rate - this provides a measure of market attractiveness By dividing the matrix into four areas, four types of SBU can be distinguished: Stars - Stars are high growth businesses or products competing in markets where they are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows. Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars. Question marks - Question marks are businesses or products with low market share but which operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors. Management have to think hard about "question marks" - which ones should they invest in? Which ones should they allow to fail or shrink? Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Using the BCG Box to determine strategy Once a company has classified its SBU's, it must decide what to do with them. In the diagram above, the company has one large cash cow (the size of the circle is proportional to the SBU's sales), a large dog and two, smaller stars and question marks. Conventional strategic thinking suggests there are four possible strategies for each SBU: (1) Build Share: here the company can invest to increase market share (for example turning a "question mark" into a star) (2) Hold: here the company invests just enough to keep the SBU in its present position (3) Harvest: here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows. (4) Divest: the company can divest the SBU by phasing it out or selling it - in order to use the resources elsewhere (e.g. investing in the more promising "question marks").

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