BUSINESS PORTFOLIO ANALYSIS
• Is a collection business and products that make-up
the company. The best business portfolio is one that
fits the company’s strengths and helps exploit the
most attractive opportunities.
• Is an organizational strategy formulation technique
based on the philosophy that the organization
should develops strategy much as they handle
• Just as sound financial and unsound ones discarded.
• Sound organizational activities should be
emphasized and unsound ones deemphasized.
Most popular business portfolios
• BCG Growth-Share Matrix
• The GE Multifactor Portfolio Matrix by
General electric Company and McKinsey
• Matsushita Strategy Matrix
• Road mapping
• Purpose: “Enable strategic planners to
select the optimal strategies for the
individual products whilst achieving
overall firm objectives” (Mcnamee, 1985)
Examples of Portfolios
Virgin: trans, planes,
cola, music store
Proctor & Gamble:
Unilever: ice cream,
PRODUCT PORTFOLIO ANALYSIS
• Matrix produced by Boston Consulting Group
• Box model relationship between a division or
product’s current or future revenue potential and
the appropriate management stance.
• The matrix chart symptoms into a diagnosis so that
an effective cure or management behavior can be
• Derivatives have been developed that are more
qualitative and more geared to developing
interpretation of the choice to be made.
– Matrix classified division or products according to their
present market share and future growth of the market
• A successful product which last from emergent to
mature market goes clockwise around the
• The intention of BCG matrix is to distinguish
between the cash generators and cash
• The matrix can be used to recommend an outline
strategy to follow.
• Conclusion: Milk the cows, divest the dogs, invest
the stars and examine the question marks
“the strategic units that make-up the
company and attempts to evaluate the
current effectiveness and vulnerabilities”
(McDonald et al, 1992)
• How much of our time and money should we
spend on our best products to ensure that they
continue to be successful?
• How much of our time and money should we
spend developing new costly products, most of
which will never be successful?
BCG Positions Throughout the Product
Example of products portfolio
What is a Cash Cow?
• Products/divisions in this segment are those the
current high income earners for organization.
• They expected to provide the major part of current
profits and form the major source of funding for
• However, Cash Cows are relatively short-term so
they are not expected to provide significant future
• For business areas and products in this segment, the
organization should look to adopt measures,
including the use of IS, to increase the profit, extend
the life time or shift the division or product into the
Star segment. These are the well-established
products in mature markets.
What is a Star?
• Products/business divisions in this segment are the ones
that provide significant revenue now and are expected to
continue to do so in the future.
• In this segment, the organization will wish to seek
opportunities to increase profits and extend the life of the
product or division.
• These are the market leader products in growth markets.
• Since these products or divisions require ongoing
investments they do not generate as much margin as
Cash Cows do.
• Again these measures may include the judicious use of
What is a Dead Dog?
• Divisions or products in this segment provide little or
no contribution to profits today and it is not expected
that this situation will change.
• This segment should be removed, which may be
achieved by divestment of the division or product, or
by taking steps to reduce associated costs or to move
the division or product into the Cash Cow, or even, if
lucky, the Star segment.
• These are the products that have lost market share to
competitors or are in declining markets.
What is a ?
• Divisions or products that organization is currently
prepared to ‘carry’ although they make little or no
contribution to revenue now, they are expected to do
so in the future.
• Usually young areas or products and probably still
being developed. Investments should be made
cautiously since the risks associated with this segment
are higher .
• Clearly the organization will seek ways to ensure that
the divisions/products of this segment quickly mature
into highly profitable Stars. These are the products
with low market share but in fast growing markets. If
successful these products or divisions will become
Boston Box - Uses
• Simplifies complex situations
• Target setting tool
• Encourages strategies to view their
business as collection of diversified
flows and investments
• Success sequences
• Disaster sequences
Sequence of action of portfolio
Example: Ford Motor
QUESTION MARKS: New products in development (or ones
that have slipped back) in high growth markets seen as
likely future cash generators (Stars or Cash cows). Risky
areas but need investment hence overall result is zero
contribution. (e.g. Off road recreational vehicles, pick-up
STAR: Often a new product achieving a high market
share thus generating high revenues, but offset by R&D
cost recovery or ongoing investment in promotion,
product and market extension, hence net loss. (e.g. Ford
KA series, Galaxy and latterly Ford Focus)
CASH COW: Well established products in mature
markets generating ongoing profits and future
development revenues (e.g. For Fiesta, Mondeo)
DOGS: Products that have lost market share to
competitors or are in decline generating little profit
but requiring cash use. Either require retiring or reinventing requiring investment hence cash flow
negative. (e.g. Ford Escort, Scorpio, Probe)