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BUS STRAT BCG PORTFOLIO MATRIX

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BUS STRAT BCG PORTFOLIO MATRIX Powered By Docstoc
					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
   Kotler’s 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- Lever’s
    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

				
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posted:7/28/2012
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