2. In the BCG matrix market growth rate is
shown on the vertical axis and indicates the
annual growth rate of the industry in which
each product line operates.
It is used as a proxy for market attractiveness
i.e., higher the growth rate, more attractive is
the to do business.
3.
4. Starsare market leaders and earn high
revenues, but require substantial
investments to finance growth and to meet
competitive challenges.
Overall
cash flow is therefore roughly in
balance.
5. Problem children are products in high
growth markets which cause a drain on cash
flow as they incur huge marketing
expenditure in reaching out the growing
number of customers.
They also incur costs in setting up new
manufacturing units to be able to serve the
growing markets.
6. Cash cows are market leaders in mature, low
growth markets i.e., investment in new
production facilities and marketing is
minimum.
High market share leads to large revenues
and hence, positive cash flow.
7. Dogs also operate in low growth markets, but
have low market share and therefore, earn
low revenues.
Most dogs produce low or negative cash
flows.
8. Relative market share
(cash generation)
LOW
HIGH
Stars ?
Hotels
Paperboards/ FMCG -
HIGH Packaging Others
Agri business
Cows
FMCG- Dogs
Cigarettes
LOW
Market growth rate
(cash usage)
9. The assumption that cash flow will be
determined by a product’s position on the matrix
is weak.
The matrix does not identify which problem
children to build, harvest or drop.
Competitors’ reactions are not assessed.
The matrix does not define a market.
The analysis ignores interdependence among
products.
Some products have a short PLC and profits
should be maximized in the stars stage instead of
building them.
