Dog, Cash Cow, Question Mark and Star
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Essentially, the matrix comprises four quadrants and a business unit or a product can be assessed and placed in one of these quadrants.
Stars are products in markets with a high rate of growth and high market share; ideally, this is where all companies wish to be across all business units though these products consume a lot of financial resources.
Cash cows generate cash and profit for the company; unlike stars, minimal investment is required or made because the market for these types of products is not growing but the company has a large share of the market with its mature product. Cash cows are the bedrock of most companies.
Question marks are those with high growth but low market share; with these products, there is much potential but potential requires resources to be realized. It is, therefore, up to the company to select the most attractive business units in this category and invest in those in hopes to increase share of the growing market thereby turning these question marks to stars or to divest and focus on the star products.
Dogs are products with low market share and limited growth rates and it is advised that companies remove these types of products/business units from their portfolios as the cost more than the benefit derived.
“Use the BCG Portfolio Analysis to determine each SBUs relative market share and whether the company as a whole is healthy.”
SBU A and B have high rates of growth. B has a very competitive market and with the companys sales at the highest level in that industry at $1.6M, it stands to reason that the market for B is profitably generating cash and is that the market is still growing. B would, therefore be a star. Conversely, the market for A also has a high rate of growth but the companys share of the market is lower than with B. A could be seen as a question mark. Would you recommend to management here that they continue to invest in A even though the market is relatively small with sales only at $500,000 versus D which is $3,200,000? Does it make sense going after more share of a relatively small and very competitive market? D looks to be the organizations cash cow as it dominates the market share by far but the rate of growth is low (not sure if 4 is meant to be -4 in the Market Growth Rate column.
” and make recommendations to future strategies.”
The rules of thumb are as follows:
Star performers are kept and invested in to capitalize on the rapid growth rate and high cash generation.