Matrix is an important tool. ThatBCG portfolio Matrix model was developed by Boston consulting group in 1970’s. That matrix also incorporates the product life cycle concept. That model can be used to access the position of strategic business units and very helpful for the organizations operating in number of different markets. BCG matrix shows various SBU on graph of Market growth Vs Market share. According to BCG Company’s business unit can be divided into four categories based on market share and market growth relative to competitors, Market growth as an industry attractiveness and market share as competitive advantage.
Following are the names of four categories in BCG Matrix.
Cash Cows
Stars
Question Marks
Dog
Each service or product should be eventuated by company and then position it on matrix. This should be done for every service and product and then plot the position of competitors’ product and services in order to determine the relative market share.
Cash Cows
The products or business with high relative market share and low industry growth rate falls into cash cows cell.As they are generate high cash flows so cash cows must be milked and extracting the profits and investing the cash in stars and question marks. These business entities generate more cash inflow with less requirements of investment. The Cash cows have high market share but industry growth is slow as compared to stars.
star products
Stars are the business entities with high market share and industry growth. These are normally known are raising star. Stars are leaders in business as they generate a large amount of cash because of its high market share but still need a lot of cash inflow as they also consume large amount of cash due to high growth potential.
Question Marks
Question marks are products having low market share but high growth potential. Reason for low market share is that they are emerging and they are yet to receive recognition by potential customer. They consume large amount of cash because they are growing rapidly but produces low cash inflowsdue to low market share. When question marks will grow they will turn into star products and ultimately into cash cows. Question marks always require critical analysis as they require high amount of capital. Management needs to develop sound business prudently and apply good project management rules and Business strategy if it is to avoid costly disasters. Because in question marks products there will be high overhead costs, high research and development costs, high publicity costs, high market education costs and low economies of scale. Due to these factors a question mark is very well possibly be loss making product until it moves toward star products.
Dogs
Dog products are low market share and low market growth products that are why they not generate inflow nor consume cash in large. A common belief that there is no point to develop these products. But these products must be present on the shelf for the peoples still using these products. Business that has been denied adequate funding for development may find themselves with high proportion of their products in this quadrant.
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