Topical Issues

The BCG Matrix31 Oct

The BCG Matrix identifies four types of product or service: dogs, cash cows, problem children and stars.

Dogs:
Dogs are mediocre products. Usually they pay they cover their costs, but don’t provide much in the way of contribution to the rest of the business, in a slow growing market. Here you may have a few alternatives; leave them alone; reduce support services, drop the product altogether or change slightly to appeal to a more specialised or niche market.

Cash Cows:
Cash cows will have a high market share, usually in a low-growth industry and should be generating substantial revenues. The excess cash generated by these products will often support the other activities in the rest of the company so it is essential to maintain the strong market position.

Question Marks/Problem children:
These are products that even though they are in a growing market, for some reason, they are not performing well. So eventually the company has to decide if they spend more money reforming these products or stop supporting them.

Stars:
Stars usually have a very that promising career, but they are not producing enough money yet. You need to invest on them to make sure they develop all their potential and eventually they will provide cash for the business, as it represents its best future prospect, turning into a future ‘cash cow.

The overall logic of the portfolio is that cash cows are the financial backers of the other segments. Ideally, some problem children will become stars, with investment from the surpluses generated by the cash cows. Stars should mature and become cash cows. Dogs will usually come to the end of their natural life over time, or can be divested.

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