Cash cows, Dogs, Question Marks, Stars - few words about Product and Growth-Share Matrix (BCG)
Have you ever use the BCG Matrix in your company?
Have you ever use the BCG Matrix in your company?See results without voting
Growth-share matrix (aka) BCG Matrix is the oldest and well-knowned matrix method of Strategic management. It keeps the conditions of KISS (keep it simple stupid). BCG Matrix is useful tool of controlling.
BCG Matrix has its origins in Boston Consulting Group – where it was published and used first time. It was in 1969.
Growth-share matrix brings us a possibility to evaluate company development possibilities. It is helpful during setting up an economical strategy. Thanks to BCG, company is able to set width and height of assortment. It can be use to finding profitable products or those which will be profitable in the nearest future.
Structure of BCG
Graphical structure of BCG Matrix, shows us results of mutual impact of factors controlled and uncontrolled by the company. Controlled factors are on the abscissa and it means relativemarket share (ratio of defined company's market share and a market share of most serious competitor).
Uncontrolled factors are placed on the ordinate and they are describing growth-speed selected market of described company.
BCG Matrix predict four strategic places for products servedby the described company. I’m talking about:
1. Stars – they are hot products with big share in the fast-evolving market. Stars are products and services providing big profits but they requires capital and investments. Stars have good outlook and hope for profits.
After some time, Stars can change their profile into Cash cows.
There are 2 kinds of Stars: (1) young Stars which are requiring big capital and investing, because they are still evolving and (2) Mature Stars which are self-financing ability.
2. Cash cows are products, which are financial pillar of the company. Cash Cows has decisive share in slowly rising market. They are responsible for profit surplus, so they are generating free capital for investments- for example in Stars.
3. Question marks– they are one big riddle. They are deficit products with low share in fast evolving market. Possibilities of this products or services are hard to describe. Upkeeping of Question marks aren't connected with big profits, but Question marks has potential for being Starsone day.
4. Dogs – they are a products, which do not brings financial surplus. Good example of bad dog is service deprivedpotential of growth. They are result of lost competition on the saturated market.
It may be good idea to leave described market sector, because of bad ROI (return of investment) of Dogs.
Good product strategy is connected with good share of services on the established market. It is good target to has few Cows (to financing the company) and few Stars (which can evolve into Star soon).
Regular using of BCG Matrix can be helpful in asses a products condition during its market life!
If you know how to use BCG Matrix, you will be able to transform Question marks into Stars and evolve Stars into Cash cows.
Practice and Strategy
It is good situation for company, if Question marks brings 10% of profits, Stars are responsible for 30% of profits, Cows gives 40-50% and dogs- 10-20%.
If company wants to correct the counting, there is need to do:
Surplus of cash (earned by Cows), invest into Question Marks development. and financing Stars. It will helps to upkeep Stars and evolve Question Marks into Stars..
Eliminating Question Marks with bad prognosis for the future to make some money free.
Care about Cash cows and make sure that they will bring regular cashflow.
BCG Matrix is formula, which got on attention in last years. It has many “pros” but BCG is not free of “Cons”.
It does not requires averaged management knowledge to use it.
BCG is simple, but it has shorted sight.
Sometimes it can be too subjective
I hope that this knowledge will be useful on your market-battle ;-)
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