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