Genesis of BCG• The origin of the Boston Matrix lies with the Boston Consulting Group in the early 1970s. .
• The Boston Consulting Group (BCG) Matrix is a simple tool to assess a company’s position in terms of its product range. It helps a company think about its products and services and make decisions about which it should keep, which it should let go and which it should invest in further.
Question mark (problem child stage?)• Investment—heavy initial capacity expenditures and high R&D costs• Earnings—negative to low• Cash-flow—negative (net cash user)• Strategy Implications – If possible to dominate segment, go after share. If not, redefine the business or withdraw
Star stage• Investment—continue to invest for capacity expansion• Earnings—Low to high earnings• Cash-flow—Negative (net cash user)• Strategy Implications – Continue to increase market share—even at the expense of short-term earnings
Cow stage• Investment—Capacity maintenance• Earnings—High• Cash-flow—Positive (net cash contributor)• Strategy Implications – Maintain market share and cost leadership until further investment becomes marginal
Dog stage• Investment – Gradually reduce capacity• Earnings—High to low• Cash-flow – Positive (net cash contributor) if deliberately reducing capacity• Strategy Implications – Plan an orderly withdrawal to maximize cash flow
Three steps to success• Continuously generate cash cows and use the cash throw-up by the cash cows to invest in the question marks that are not self-sustaining• Stars need a lot of reinvestments and as the market matures, stars will degenerate into cash cows and the process will be repeated.• As for dogs, segment the markets and nurse the dogs to health or manage for cash
Three paths to failure• Over invest in cash cows and under invest in question marks – Trade further opportunities for present cash flow• Under invest in the stars – Allow competitors to gain share in a high growth market• Over milked the cash cows