The companies do have their business portfolios in terms of SBU. They operate the business of SBU in different formats such as Product, Product Line, Brand, and Division and so on. Hence it becomes a tough task to find out the attractiveness and strength of the company in the market. Hence Boston Consulting Group has designed a matrix which explains the required parameters. This is called as BCG matrix or Growth share Matrix. Hence this matrix defines the parameters of SBU on a matrix format in X-axis and Y-axis. Hence it is defined as a portfolio planning method which gives a result for the relative market growth and share of SBU, After Classifying the SBU's in four different ways. The four ways are Stars, Cash Cows, Question Marks, and Dogs.
i. Stars: These SBU are high in growth and high in share too. They require heavy investments to finance for the growth. If these SBU's are slowed down then they will turn into Cash Cows.
ii. Cash Cows: These are with low growth and high share business SBU. These are the Successful SBU for the company as it requires less investment for their market shares. These produce lot of cash which in Terms Company uses in other SBU or paying bills.
iii. Question Marks: These are lower in shares and higher in growth markets. These SBU require lot of cash to hold the shares. Hence here the role of management comes in picture so as to identify the question marks to turn into Stars or Move out from matrix.
iv. Dogs: These SBU are lower in growth and lower in shares too. They may generate the cash to hold them in the market but may generate huge cash to become a source for the company.
Hence the SBU are classified in these four categories so as to find the growth rate and market shares. The matrix contains Market growth rate on Y-axis which impacts the level of attractiveness. And in X-axis it has relative market share to find the strengths of the company. Hence the BCG or Growth share matrix works on both the factors for the companies. If we take an example of Coca- Cola then the products can be in the matrix are
• Thums up - Stars
• Kinley - Cash Cows
• Sprite - Question Marks
• Georgia Café - Dogs
Hence from above example we can conclude that BCG matrix helps the company to check out with their SBU's Attractiveness and Strength in the market.
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Reference : Philip Kotler and Scribd.com.