Page 256 - (DK) The Business Book

254 PRODUCT PORTFOLIO

The BCG matrix “Stars” are products that have a
MARKET GROWTH can be used to large market share in a growing
Low High categorize products market. These require investment
in terms of growth to maintain their position and help
Question mark and market share,
Dog so companies can them grow into the dominant
products,
products have low check that they have product in the market. They have
sometimes also
Low growth prospects; referred to as a well-balanced the potential to be a future cow.
market share and
“Cows“ are products that were
“Infants,” have product portfolio. once stars. They continue to hold a
MARKET SHARE are plotted into cells mature products in an established
they may be ripe
Products with a
the potential for
for divestment.
high market share
large market share, but they are
growth.
on the left-hand
market that has little potential for
column, and those
growth. They no longer need much
with low market
investment, because they have
share on the right.
Cow
Star
products have a
products are
to products with high
High in the market and high-selling items The top row is home reached their growth potential, and
as market leaders they sell in large
strong presence
potential for growth,
numbers of units, giving them the
generate a solid in a market that while those in the
is expanding. bottom row are in advantage of economies of scale.
revenue.
declining markets. This means they generate cash
while costing very little.
The matrix in practice
Nestlé is often cited by management
theorists as a textbook example of
can use this information to make culling from the product portfolio. how a company might arrange its
sure it has a mix of products that However, before the dog is sold off product portfolio according to the
will satisfy its short- and long-term or disposed of, management must BCG matrix. The world’s largest
needs, and to think about the priority consider if it is worth keeping for food company, with some 8,000
and resources they should allocate strategic reasons. For example, if it brands, Nestlé has developed a
to each product. The matrix assesses is blocking a competitor product or strategy of building its long-term
products on two levels: first, the the market for that industry is likely cows and keeping them as fresh as
potential growth in the market for to pick up in the future, it might be possible, devoting capital to
that product; second, the market worth retaining. Or it may play an product areas that have a prospect
share held by each product. important role in complementing of high returns, and shedding
another product in the portfolio
Using the Boston matrix and providing customers with a
By using the matrix, managers can stepping stone to that product.
see where their products fall among Like the dog, the “question
four categories: dogs, question mark” product also has a low share
marks, stars, and cows. “Dogs” are of the market, but it is in a high-
products that have low growth growth industry. Products in this High-growth products require
prospects and a low market share. box can create a dilemma for the cash inputs to grow.
These products may be making a company. If it is new, does the Low-growth products should
loss, barely breaking even, or product need more time to prove generate excess cash. Both are
possibly generating a tiny amount itself, and more investment in needed simultaneously.
of profit. Because they are in a manufacturing or marketing? Or Bruce Henderson
slow-growing market, there is little does it need more market share,
chance that performance will which could be arranged by buying
improve under current conditions. up competitors? Perhaps it needs
Products that fall into this cell of repositioning in the market. Or
the matrix are candidates for should it be dropped entirely?