Overview[ edit ] To use the chart, analysts plot a scatter graph to rank the business units or products on the basis of their relative market shares and growth rates. Cash cows is where a company has high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, yet corporations value owning them due to their cash-generating qualities.
Overview[ edit ] To use the chart, analysts plot a scatter graph to rank the business units or products on the basis of their relative market shares and growth rates.
Cash cows is where a company has high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business.
They are regarded as staid and boring, in a "mature" market, yet corporations value owning them due to their cash-generating qualities. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.
Dogs, more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company.
They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed.
Dogs, it is thought, should be sold off. Question marks also known as problem children or Wild cats are businesses operating with a low market share in a high-growth market. They are The boston consulting group an analysis starting point for most businesses.
Question marks have a potential to gain market share and become stars, and eventually cash cows when market growth slows. If question marks do not succeed in becoming a market leader, then after perhaps years of cash consumption, they will degenerate into dogs when market growth declines.
Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. Stars are units with a high market share in a fast-growing industry. They are graduated question marks with a market- or niche-leading trajectory, for example: The hope is that stars become next cash cows.
Stars require high funding to fight competitors and maintain their growth rate. When industry growth slows, if they remain a niche leader or are amongst the market leaders, stars become cash cows; otherwise, they become dogs due to low relative market share.
As a particular industry matures and its growth slows, all business units become either cash cows or dogs. The natural cycle for most business units is that they start as question marks, then turn into stars. Eventually, the market stops growing; thus, the business unit becomes a cash cow.
At the end of the cycle, the cash cow turns into a dog. As BCG stated in Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities. The balanced portfolio has: Practical use[ edit ] "To be successful, a company should have a portfolio of products with different growth rates and different market shares.
The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously. The growth—share matrix thus offers a "map" of the organization's product or service strengths and weaknesses, at least in terms of current profitability, as well as the likely cashflows.
The need which prompted this idea was, indeed, that of managing cash-flow.
It was reasoned that one of the main indicators of cash generation was relative market share, and one which pointed to cash usage was that of market growth rate. Relative market share[ edit ] This indicates likely cash generation, because the higher the share the more cash will be generated.
As a result of 'economies of scale' a basic assumption of the BCG Matrixit is assumed that these earnings will grow faster the higher the share. The exact measure is the brand's share relative to its largest competitor. Thus, if the brand had a share of 20 percent, and the largest competitor had the same, the ratio would be 1: If the largest competitor had a share of 60 percent, however, the ratio would be 1: If the largest competitor only had a share of 5 percent, the ratio would be 4: If this technique is used in practice, this scale is logarithmic, not linear.
On the other hand, exactly what is a high relative share is a matter of some debate. The best evidence is that the most stable position at least in fast-moving consumer goods markets is for the brand leader to have a share double that of the second brand, and triple that of the third.
Brand leaders in this position tend to be very stable—and profitable; the Rule of The growth–share matrix (aka the product portfolio matrix, Boston Box, BCG-matrix, Boston matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that was created by Bruce D.
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