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Boston Consulting Group

Matrix
Developed by Boston consulting group for the purpose of
systematically identifying the main strategic characteristics of
specific business segments.
Calls for careful analysis of each product
Boston Consulting Group Matrix
It is also known as Portfolio Planning Model as it involves
the allocation of resources with the total portfolio.
Here each SBU is classified in terms of the SBU’s market share
relative to major competitors and the annual growth rate of
the industry.
A strategic business unit (SBU) is a profit center which
focuses on product offering and market segment.
SBUs typically have a discrete marketing plan, analysis of
competition, and marketing campaign, even though they may
be part of a larger business entity.
The BCG has identified four following categories of SBU’s
and suggested the appropriate strategy for each one-
(i) Star
(ii) Cash Cow
(iii) Question mark
(iv) Dog
(i) Star
The SBU in this category is in the most favorable position
as far as the competitive advantage and industry growth
is concerned.
Stars are very potential and can generate substantial cash
but require finances to maintain the position.
They are the market leaders, growing fast, substantial
profits, require large investments
Strategies for increase in market share would be more
promotion, greater distribution and direct or indirect
price reductions.
As the industry matures, the stars become cash cows.
 Strategies
 Protect existing share
 Reinvest earnings in the form of price reductions, product
improvements, providing better market coverage, production
efficiency etc
 Obtain a large share of new users
(ii) Cash Cow
The SBU has the strong competitive advantage but in
mature or declining industry (low growth).
It usually has the loyal customers. Sales are relatively
steady.
A cash cow generate more cash than required and the
additional cash be used to support other SBU’s
Profitable products , generate more cash than needed to
maintain market share.
The marketing strategy would be reminder advertising,
sales promotion, maintaining distribution channels and
encourage repurchases.
 Strategies
 Maintain market dominance
 Invest in process improvements and technological leadership
 Use excess cash to support research and growth elsewhere in
the company
(iii) Question Mark / Wild Cats/ Problem Child
The SBU has little impact on market place with competitive
disadvantage in growing industry. There is little customer support
for the SBU.
Rapid growth, poor profit margins, enormous demand of cash.
The SBU requires the substantial marketing investment to maintain
or to increase market share in the face of tough competition.
The strategies may be to increase the promotional budget,
persuasion of distributors, improving product and reduce prices
(if product is homogeneous) or abandon.
Here the marketer has to see that whether the SBU can compete in
the market or not.
 Strategies
 Buy existing market share by acquiring competitors
 Divestment
 Harvesting
 Abandonment
(iv) Dog
It is an SBU with the competitive disadvantage in a declining
industry (low growth).
The SBU is unable to attract the substantial number of
customers because of intense competition.
Dog SBU has cost disadvantage and few growth opportunities.
The suggested strategies may be focus, harvesting profits by
cutting services or divestment (to sell).
 Focus on specialised segment of the market that can be
dominated and protected from competitive inroads
 Harvesting- cut back all support costs to a minimal level
 Divestment- sale of the growing concern
 Abandonment – deletion from the product line.
In other words, the choice of strategy of the respective
strategic business areas ought to be on the following lines:
 The Star should be cherished and reinforced
 The Dogs should probably be divested, unless there are
strong reasons for keeping them.
 The Cash Cows should be made to control (severely)
their investments and send excess cash to other SBU’s
 The Question Marks be analyzed to see whether the
investment into converting them into stars is worthwhile.