BCG
the segment. It serves as a measure of the company’s strength in the relevant market segment. 0.1x means that the company’s sales volume is 10% of the leaders’ sales volume. 4. Question marks: - - business that operate in high-growth market but have low relative market shares. Most business start off as question marks. A question markets requires a lot of cash to spend on plant, equipment to keep up with the fast-growing market. 5. Stars: if the question marks are successful, it becomes a star. A star is the market leader in a high growth market. A star does not necessarily produce a positive cash flow for the company. The company must spend substantial funds to keep up the high market growth and fight off competitor’ attacks. 6. Cash cows: When a market’s annual growth rate falls to less than 10 percent, the star becomes a cash cow if it still has the largest relative market share. A cash cow produces a lot of cash for the company. The company does not have to finance capacity expansion because the market’s growth rate has slowed down. Because the business is the market leader, it enjoys economies of scale and higher profit margins. Cash cows can be used to support other businesses 7. Dogs: Dogs are businesses that have weak market shares in low growth markets. They typically generate low profits or losses. 8. Next task is to determine what objective, strategy and budget to assign to each SBU. 4 strategies can be pursued: a. Build: increase market share, even forgoing shot term earning – question marks. b. Hold: Preserve market share. Cash cows. c. Harvest: Increase short-term cash flow. Weak cash cows, question marks, dogs d. Divest: To sell or liquidate the business. Dogs and question marks