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    BCG Matrix

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    pallav86
    The BCG Matrix is a portfolio management tool that assesses products based on their market share and market growth. It places products into four categories: Stars, Cash Cows, Dogs, and Question Marks. Stars are high growth, high share products that require investment. Cash Cows are low growth, high share products that generate cash. Dogs have low growth and share and should be avoided or divested. Question Marks have high growth but low share, requiring investment to increase their share or be divested. The matrix helps avoid one-size-fits-all strategies that don't appropriately allocate resources to different product types.

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    BCG Matrix

    Uploaded by

    pallav86
    439 views2 pages
    The BCG Matrix is a portfolio management tool that assesses products based on their market share and market growth. It places products into four categories: Stars, Cash Cows, Dogs, and Question Marks. Stars are high growth, high share products that require investment. Cash Cows are low growth, high share products that generate cash. Dogs have low growth and share and should be avoided or divested. Question Marks have high growth but low share, requiring investment to increase their share or be divested. The matrix helps avoid one-size-fits-all strategies that don't appropriately allocate resources to different product types.

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    The BCG Matrix is a portfolio management tool that assesses products based on their market share and market growth. It places products into four categories: Stars, Cash Cows, Dogs, and Question Marks. Stars are high growth, high share products that require investment. Cash Cows are low growth, high share products that generate cash. Dogs have low growth and share and should be avoided or divested. Question Marks have high growth but low share, requiring investment to increase their share or be divested. The matrix helps avoid one-size-fits-all strategies that don't appropriately allocate resources to different product types.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    439 views2 pages

    BCG Matrix

    Uploaded by

    pallav86
    The BCG Matrix is a portfolio management tool that assesses products based on their market share and market growth. It places products into four categories: Stars, Cash Cows, Dogs, and Question Marks. Stars are high growth, high share products that require investment. Cash Cows are low growth, high share products that generate cash. Dogs have low growth and share and should be avoided or divested. Question Marks have high growth but low share, requiring investment to increase their share or be divested. The matrix helps avoid one-size-fits-all strategies that don't appropriately allocate resources to different product types.

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    The BCG Matrix method is the most well-known portfolio management tool.

    It is based on product
    life cycle theory. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix
    can be used to determine what priorities should be given in the product portfolio of a business unit. To
    ensure long-term value creation, a company should have a portfolio of products that contains both
    high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The
    Boston Consulting Group Matrix has 2 dimensions: market share and market growth. The basic idea
    behind it is: if a product has a bigger market share, or if the product's market grows faster, it is better
    for the company.

    THE FOUR SEGMENTS OF THE BCG MATRIX


    Placing products in the BCG matrix provides 4 categories in a portfolio of a company:
    • Stars (high growth, high market share)
    ○ Stars are using large amounts of cash. Stars are leaders in the business.
    Therefore they should also generate large amounts of cash.
    ○ Stars are frequently roughly in balance on net cash flow. However if needed
    any attempt should be made to hold your market share in Stars, because the
    rewards will be Cash Cows if market share is kept.
    • Cash Cows (low growth, high market share)
    ○ Profits and cash generation should be high. Because of the low growth,
    investments which are needed should be low.
    ○ Cash Cows are often the stars of yesterday and they are the foundation of a
    company.
    • Dogs (low growth, low market share)
    ○ Avoid and minimize the number of Dogs in a company.
    ○ Watch out for expensive ‘rescue plans’.
    ○ Dogs must deliver cash, otherwise they must be liquidated.
    • Question Marks (high growth, low market share)
    ○ Question Marks have the worst cash characteristics of all, because they have
    high cash demands and generate low returns, because of their low market share.
    ○ If the market share remains unchanged, Question Marks will simply absorb
    great amounts of cash.
    ○ Either invest heavily, or sell off, or invest nothing and generate any cash that
    you can. Increase market share or deliver cash.
    THE BCG MATRIX AND ONE SIZE FITS ALL STRATEGIES
    The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size
    fits all strategy approach, such as a generic growth target (9 percent per year) or a generic return on
    capital of say 9,5% for an entire corporation.
    In such a scenario:
    • Cash Cows Business Units will reach their profit target easily. Their management
    have an easy job. The executives are often praised anyhow. Even worse, they are often
    allowed to reinvest substantial cash amounts in their mature businesses.
    • Dogs Business Units are fighting an impossible battle and, even worse, now and then
    investments are made. These are hopeless attempts to "turn the business around".
    • As a result all Question Marks and Stars receive only mediocre investment funds. In
    this way they can never become Cash Cows. These inadequate invested sums of money are
    a waste of money. Either these SBUs should receive enough investment funds to enable
    them to achieve a real market dominance and become Cash Cows (or Stars), or otherwise
    companies are advised to disinvest. They can then try to get any possible cash from the
    Question Marks that were not selected.
    OTHER USES AND BENEFITS OF THE BCG MATRIX

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