02-07-2013, 01:11 PM
Boston Consulting Group Matrix
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Boston Consulting Group Matrix
It is also known as Portfolio Planning Model as it involves the allocation of resources with the total portfolio.
Here each SBU is classified in terms of the SBU’s market share relative to major competitors and the annual growth rate of the industry.
A strategic business unit (SBU) is a profit center which focuses on product offering and market segment.
SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity.
(i) Star
The SBU in this category is in the most favorable position as far as the competitive advantage and industry growth is concerned.
Stars are very potential and can generate substantial cash but require finances to maintain the position.
They are the market leaders, growing fast, substantial profits, require large investments
Strategies for increase in market share would be more promotion, greater distribution and direct or indirect price reductions.
As the industry matures, the stars become cash cows.
(ii) Cash Cow
The SBU has the strong competitive advantage but in mature or declining industry (low growth).
It usually has the loyal customers. Sales are relatively steady.
A cash cow generate more cash than required and the additional cash be used to support other SBU’s
Profitable products , generate more cash than needed to maintain market share.
The marketing strategy would be reminder advertising, sales promotion, maintaining distribution channels and encourage repurchases.
(iv) Dog
It is an SBU with the competitive disadvantage in a declining industry (low growth).
The SBU is unable to attract the substantial number of customers because of intense competition.
Dog SBU has cost disadvantage and few growth opportunities.
The suggested strategies may be focus, harvesting profits by cutting services or divestment (to sell).