Portfolio Analysis:

The BCG Matrix and the GE 9-

Cell Matrix for Evaluating
Diversified Companies
 BCG Matrix

High
Question
Stars Marks
Industry
Growth

Cash Dogs
Cows
Low

High 1-0.8 Low

Relative Market Share
 Characteristics of Cash Cows

 A cash cow business generates cash surpluses over

and above what is needed to sustain its present
market position
 Such businesses are valuable because surplus cash can
be used to
 Pay corporate dividends
 Finance new acquisitions
 Invest in promising cash hogs
 Strategic objective: Fortify and defend present market
position--keep the business healthy!!!
Characteristics of Cash Hogs
 A business is a cash hog when its internal
cash flows are inadequate to fully fund its
need for working capital and new capital
investment the parent company has to
continually pump in capital to “feed the hog”
 Strategic options
 Aggressively invest in
attractive cash hogs
 Divest cash hogs lacking
long-term potential
 GE Nine-Cell Matrix
Industry
• Relative Costs
Attractiveness • Profit Margins
• Market Size • Fit with KSFs
• Growth Rate
• Profit Margin 10.0 6.7 3.3 1.0
Strong Average Weak
• Intensity of Competition
• Seasonality
• Cyclicality High
• Resource Requirements
6.7
• Social Impact
• Regulation Medium
• Environment
• Opportunities & Threats 3.3
• Relative Market Share
• Reputation/ Image Low
• Bargaining Leverage
• Ability to Match 1.0

Quality/Service
Rating Scale: 1 = Weak ; 10 = Strong
 Strategy Implications of
Attractiveness/Strength Matrix
 Businesses in upper left corner
 Accorded top investment priority
 Strategic prescription is grow and build
 Businesses in three diagonal cells
 Given medium investment priority
 Invest to maintain position
 Businesses in lower right corner
 Candidates for harvesting or divestiture
 May be candidates for an overhaul and reposition
strategy
 The Attractiveness/Strength
Matrix
 Allows for intermediate rankings between high and
low and between strong and weak
 Incorporates a wide variety of strategically relevant
variables
 Stresses allocating corporate resources to
businesses with greatest potential for
 Competitive advantage and
 Superior performance
 Decide Resource Allocation
Priorities and Strategic
 Objective:
Direction
“Get the biggest bang for the buck” 23 6
in allocating corporate resources 45
 Procedure:
 Rank each business from highest to lowest priority
for corporate resource support and new investment
(steer resources to high opportunity areas and limit
support to low opportunity areas)
 Develop a general strategic direction for each
business