Business Portfolio Analysis

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 Boston Consultancy Group
Portfolio Matrix 1970s

Fast

STARS WILD CATS

(?)
Business Growth Rate

CASH COWS DOGS

Slow

Strong Weak

Relative Market Share

 Boston Consultancy Group
Portfolio Matrix 1970s

Fast

STARS QUESTION MARKS

Business Growth Rate

Earnings: Low, steadily growing Earnings: Low but growing.

Cash Flow: Neutral
Strategy: Invest for growth
CASH COWS
Earnings: High & stable.
Cash Flow: High & stable
Strategy: Invest to maintain
current level
Slow
Cash Flow: Negative
Strategy: Invest, if product
shows potential; else sell.
DOGS
Earnings: Low and unstable.
Cash Flow: Neutral or Negative
Strategy: Invest, if product
shows potential; else sell.

Strong Weak

Relative Market Share

 Boston Consultancy Group
Portfolio Matrix

1. The Matrix draws attention to the cash flow, investment characteristics and
financial needs of an organizations separate businesses .

2. The relative positions of different businesses evolve over time. Dogs become
Question Marks, Question Marks become Stars, Stars become Cash Cows and
Cash Cows become Dogs.

3. Normally, products or businesses change positions in a clockwise movement

across quadrants (except Wild Cats, when investment may cause the product to
become a Dog).

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 Boston Consultancy Group
Portfolio Matrix

1. Question Marks: Products or Divisions in QI have low relative market share position
and yet compete in a high growth industry.
Generally the cash needs of these firms are high cash generation is low.
These businesses are called QUESTION MARKS because the organization must decide
whether to strengthen them by pursuing an intensive strategy or to sell them.
2. Stars: QII businesses, STARS, represent the organizations best long run opportunities for
growth and profitability.
These Divisions with high Relative Market Share and a high Growth Rate should receive
substantial investment to maintain or strengthen their dominant positions.
Integration Strategies and Intensive Strategies are most appropriate for these products.
3. Cash Cows: Products or Divisions in QIII have a high relative market share position but
compete in a low growth industry. These CASH COWS generate cash in excess of their needs.
Many of todays cash cows are yesterdays stars.
Cash Cows should be maintained in their strong position as long as possible.
4. Dogs: QIV products or divisions, are known as DOGS. They have low relative market share
and compete in a no growth segment.
Because of their weak internal and external positioning these businesses are often liquidated
or divested
For a Dog, retrenchment can be the best strategy and many dogs have bounced back after
strenuous asset and cost reductions to become profitable.
 Boston Consultancy Group
Portfolio Matrix

Grow & Build Invest Selectively

Fast

Stars Question Marks

Business Growth Rate (BG Rate)

Cash Cows Dogs

Slow

Strong Weak
Hold & Maintain Harvest or Divest
Relative Market Share Position (RMSP)
 Portfolio Matrix related Strategy

Hold Strategy
To enjoy continued strong Fast

Business Growth Rate

cash flow. Relatively high
market share / low market
growth rate Cash Cow
products have high market Cash Cows
share. Marginal
investments are required
Slow
to maintain the product
category (s) at existing
levels. Strong Weak

Relative Market Share

 Portfolio Matrix related Strategy

Build Strategy
Fast Stars Question Marks
To grow the business.

Business Growth Rate

Investment in product
categories that lie in High
Business Growth
quadrants, shift them out of
non cash contribution
categories. Slow

Strong Weak

Relative Market Share

 Portfolio Matrix related Strategy

Harvest Strategy
To develop short term cash Fast
flows irrespective of the

Business Growth Rate

long term damaging effect
to the product or business.
This strategy is appropriate
Dogs
for any weak product(s)
where disposal in the form
of a sale is unavailable or Slow

not preferred due to high

exit barriers Strong Weak
Divest Strategy
Relative Market Share
To change the capital
outlay of business and
allow resources to be used elsewhere
 Draw the
Exercise BCG Portfolio Matrix
for Limited Brands Inc.

Divisions $ m. Sales % Sales $ m Profits % Profits RMSP BG Rate %

Victoria's Secrets Stores 3,113 25 499 48.6 0.80 10

Victoria's Secret Direct 1,119 9 300 29.4 0.60 15

Bath and Body Works 2,169 17 400 39.0 0.40 5

Express 1,913 15 12 1.2 0.20 0

Limited Stores 3577 29 4 0.1 0.50 -5

Henri Bendel & Mast Industries 517 5 -188 -18.3 0.20 -10
 Draw the
BCG Portfolio Matrix
for Limited Brands Inc.

1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0
Fast +20
+15 Stars Question Marks
Business Growth Rate (BG Rate)

Victorias Secret Direct

+10

+5 Victorias Secret Stores Bath & Body Works

0 Express
Cash Cows Dogs
-5

-10 Limited Stores

H Bandel & Mast Industries
-15

Slow - 20

Strong Weak
Relative Market Share Position (RMSP)
 Draw the
Exercise BCG Portfolio Matrix
for Personal Care (Soap) Division of HUL
Competitors Competitors
Revenues Market Product (Highest Market Competitors Market Growth
Products (Rs Crs) Share % Market Share) Share % Size (Rs crs) Rate %

Wheel Detergent 2,500 20.83 Ghari 13.5 1,620

16
Surf 4,224 35.2 Tide 20.88 2,506

Lifebuoy Soap 1,530 18.0 Nirma 10.4 884

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Lux 1,318 15.5 Cinthol 10.5 893

Dove Shampoo 300 7.9 Pantene 9.4 357

12
Clinic Plus 802 21.1 H&S 23 874
 Strategy Formulation Analytical Framework
Tools for Strategic Choices

Stage 1: The Input Stage

External Factor Internal Factor Competitive Profile

Evaluation Matrix (EFE) Evaluation Matrix (IFE) Matrix (CPM)

Stage 2: The Matching Stage

SWOT Strategic Position Boston Consultancy Internal External Grand Strategy

Analysis and Action Evaluation Group (BCG) Matrix Matrix Matrix
(SPACE) Matrix

Stage 3: The Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

 Internal External (IE) Matrix

Internal-External Factor Evaluation Matrix

identifies the accumulated impact of external
forces and the internal capabilities of a
business organization

1. Is similar to Portfolio Matrix

1. Involves plotting of Organizational Divisions on a schematic diagram
2. Size of the circle represents %age sales.
3. Pie sizes identify the % profit contribution

2. BCG is a 2x2 matrix; IE is a 3x3 matrix.

3. Axes are different

1. BCG Matrix Business growth rate against Relative Market share
2. IE Matrix Plots IFE score against EFE score
4. BCG and IE matrix, together, give the directions.
1. Plot for the future
 Internal External (IE) Matrix

Grow & Build Hold & Maintain

Strong Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
External Factor Evaluation Score

High I II III
3.0 to 4.0

Medium
EFE

IV V VI
2.0 to 2.99

Low VII VIII IX

1.0 to 1.99

Harvest or Divest
Internal Factor Evaluation Score
IFE
 Using the GE Business Screen, decide where this
business should
(i) Invest
(ii) Hold and Maintain
(iii) Harvest or Divest
$ m. % of
Regions Revenue Revenues $ m Profits % Profits EFE IFE

Western Region 1,514 34 306 35 3 2

Northern Region 1,299 29 249 28 3 3

Southern Region 880 20 123 14 2 2

Eastern Region 780 17 199 23 2.5 2.5

Total 4,473 100 877 100

 Internal External (IE) Matrix

Grow & Build Hold & Maintain

Strong Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
External Factor Evaluation Score (EFE)

High 28% 35%

3.0 to 4.0
NR WR

23%
Medium SR
2.0 to 2.99 ER
14%

Low
1.0 to 1.99

Internal Factor Evaluation Score (IFE)

 General Electrics Business Screen

High Invest / Grow Invest / Grow Hold /

Maintain
Industry Attractiveness

Medium Invest / Grow Hold / Harvest /

Maintain Divest

Low Hold / Harvest / Harvest /

Maintain Divest Divest

Strong Average Weak

Business Strength / Competitive Position 18
 General Electrics Business Screen

C
Winners Winners
A Question
High B Marks

D More sophisticated than BCG

uses more variables
Winners
Industry Attractiveness

E Average
Businesses
Medium F
Losers

H
Losers
G
Low
Profit Source: Adapted from Strategic
Producers Losers Management in GE, Corporate
Planning and Development,
General Electric Corporation. Used
Strong Average Weak
by permission of General Electric
Business Strength/Competitive Position Company.
 General Electrics Business Screen

Vertical axis represents Industry Attractiveness:

Market Size and Growth rate
Includes Industry profit margins
Competitive intensity
Seasonality and cyclicality
Economies of Scale
Technology and Social impacts
Environmental and Legal impacts
Horizontal axis represents Business Strength / Competitive position:
Relative Market Share
Includes Profit Margins
Ability to compete on price and quality
Knowledge of customer and markets
Competitive strengths and weaknesses
Technological capabilities
Caliber of management team
 Differences:
BCG Matrix and General Electrics Business Screen

Compares across 4 Cells Compares across 9 Cells

Axis Axis
Relative Market Share & Industry Business Strength & Industry
Growth Rate Attractiveness

Uses single measures for measuring Uses multiple measures to measure

Market Share and Growth Rate Business Strength and Industry
Attractiveness

Classification High & Low Uses different sets of Classification

High, Medium & Low or Strong,
Average and Weak

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