Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued. These businesses usually follow stability strategies. These SBU’s are the corporation’s key source of cash, and are specifically the core business. Cash cows require little investment and generate cash that can be utilized for investment in other business units. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. If successful, a star will become a cash cow when the industry matures. SBU’s located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Stars- Stars represent business units having large market share in a fast growing industry. Strategic management process consists of four components - Environmental Scanning, Strategic.įigure: BCG Matrix. Strategic Management Process means defining the organizations strategy. By using it, you can look intelligently at how you can best take advantage. The TOWS Matrix is a relatively simple tool for generating strategic options. Powell Company began the 2016 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock and $66,000 retained earnings. Each of these cells represents a particular type of business. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Resources are allocated to the business units according to their situation on the grid. While, if all the SBU’s are located in different industries, then the mid- point is set at the growth rate for the economy. The mid- point of relative market share is set at 1. BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The analysis requires that both measures be calculated for each SBU. Market Growth Rate = Industry sales this year - Industry Sales last year. Relative Market Share = SBU Sales this year leading competitors sales this year. In other words, it is a comparative analysis of business potential and the evaluation of environment.Īccording to this matrix, business could be classified as high or low according to their industry growth rate and relative market share. It is a two dimensional analysis on management of SBU’s (Strategic Business Units). It provides a graphic representation for an organization to examine different businesses in it’s portfolio on the basis of their related market share and industry growth rates.
It is the most renowned corporate portfolio analysis tool.
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA.
BCG Matrix - Meaning and its Limitations.