08-10-2012, 05:02 PM
BCG Matrix
BCG Matrix.ppt (Size: 68 KB / Downloads: 31)
Four segments in the BCG matrix:
Cash Cows (high market share, low growth)
They are net generators of resources. They bring lot of cash to the company. They operate in low-growth markets; therefore they do not need heavy investments. Marketers must keep investments low on cash cows. Investment in cash cows is directed only at protecting market share and cash flows. Because of their maturity, cash cows typically do not require much development capital anyway. Cash cows are an extremely valuable asset to the business. Without them, the firm would need to rely far more heavily on external capital for funding the growth of stars, or troubleshooting question marks. Innovation in cash cows is typically aimed at increasing cash flow, for instance by reducing transactional costs so as to increase margins.
Dogs (low market share, low growth)
They bring weak market shares and that too in low growth markets. Dogs are generally a drag on the company. They are also known as cash-traps. Marketers must liquidate them as early as possible, if they are not delivering cash. Marketers must avoid and reduce the number of these in product portfolio. They must keep an eye out for expensive revival strategies - a dog is typically always a dog.
Stars (high market share, high growth)
Stars are net users of resources. They need good investment backing as they operate in high-growth market. They do not bring immediate profits but hold great potential for future. Marketers must invest further in these - they incur high costs, but they are market leaders and would generate lots of cash. These are the future of the firm. The high growth rate requires heavy investment, but according to the experience curve it is likely that stars will reward the attention by producing high margins and strong cash flow. While stars grow, at least some of the profits generated should be invested in further growth. When growth slows as they enter first maturity and then the declining phase of the life cycle, they become cash cows. Investment in them stops and they become the funders of new emerging stars.
Strategies based on BCG Matrix
Build Share: Companies can build share: The companies can turn a question mark into star or a dog into question mark by investing more for building a product.
Hold investments: A company can invest bare minimum to keep the SBU in present position. This means the company can decide not invest further in an particular SBU.
Harvest Investments: A company reduces or withdraws the amount of investments in order to maximize short term cash flow from the SBU. This may effect a Star turning into Cash Cow.
Divest: The company can sell the SBU or phase it out in order to use the resources elsewhere.
BCG Matrix.ppt (Size: 68 KB / Downloads: 31)
Four segments in the BCG matrix:
Cash Cows (high market share, low growth)
They are net generators of resources. They bring lot of cash to the company. They operate in low-growth markets; therefore they do not need heavy investments. Marketers must keep investments low on cash cows. Investment in cash cows is directed only at protecting market share and cash flows. Because of their maturity, cash cows typically do not require much development capital anyway. Cash cows are an extremely valuable asset to the business. Without them, the firm would need to rely far more heavily on external capital for funding the growth of stars, or troubleshooting question marks. Innovation in cash cows is typically aimed at increasing cash flow, for instance by reducing transactional costs so as to increase margins.
Dogs (low market share, low growth)
They bring weak market shares and that too in low growth markets. Dogs are generally a drag on the company. They are also known as cash-traps. Marketers must liquidate them as early as possible, if they are not delivering cash. Marketers must avoid and reduce the number of these in product portfolio. They must keep an eye out for expensive revival strategies - a dog is typically always a dog.
Stars (high market share, high growth)
Stars are net users of resources. They need good investment backing as they operate in high-growth market. They do not bring immediate profits but hold great potential for future. Marketers must invest further in these - they incur high costs, but they are market leaders and would generate lots of cash. These are the future of the firm. The high growth rate requires heavy investment, but according to the experience curve it is likely that stars will reward the attention by producing high margins and strong cash flow. While stars grow, at least some of the profits generated should be invested in further growth. When growth slows as they enter first maturity and then the declining phase of the life cycle, they become cash cows. Investment in them stops and they become the funders of new emerging stars.
Strategies based on BCG Matrix
Build Share: Companies can build share: The companies can turn a question mark into star or a dog into question mark by investing more for building a product.
Hold investments: A company can invest bare minimum to keep the SBU in present position. This means the company can decide not invest further in an particular SBU.
Harvest Investments: A company reduces or withdraws the amount of investments in order to maximize short term cash flow from the SBU. This may effect a Star turning into Cash Cow.
Divest: The company can sell the SBU or phase it out in order to use the resources elsewhere.