Techniques or Methods of Portfolio Analysis

1. Boston Consulting Group (BCG) Growth-Share Matrix
2. Ansoff’s Product Market Growth Matrix
3. ADL Matrix
4. General Electric Matrix [“Stop-Light” Strategy Model]

 

1. BCG Growth Matrix

The BCG growth-share matrix is the simplest way to portray a company portfolio of investments.

Growth share matrix also known cow and dog metaphors matrix for resource allocation in a diversified company.

 

 

Boston Consulting Group (BCG Growth Share Matrix)

BCG is a two-dimensional growth share matrix.

We Plot relative market share on X axis and market growth rate on y axis.

Relative market share has two columns high and low and market growth rate has two row that is high and low

Using the matrix organization can identify four different type of product or SBU as following:

• STARS
• CASH COWS
• QUESTION MARKS
• DOGS

Using the matrix, organizations can identify four different types of products or SBU as follows:

STARS

Stars are the combination of relative market share high and market growth rate high.

Stars are products or SBUs that are growing rapidly. They also need heavy investment to maintain their position and finance their rapid growth potential. They represent best opportunities for expansion.

CASH COWS

This is the combination of high relative market share but low growth rate.

Cash Cows are low-growth, high market share businesses or products. They generate cash and have low maintenance costs. They are established, successful, and need less investment to maintain their market share. In long run when the growth rate slows down, stars become cash cows.

QUESTION MARKS

This is the combination of low relative market share but high growth rate.

Question marks, sometimes called problem children or wildcats.

They require a lot of cash to hold their share. They need heavy investments with low potential to generate cash. Question marks, if left unattended, are capable of becoming cash traps. Since growth rate is high, increasing, it should be relative leaser. It is for business organizations to turn them stars and then to cash cows when the growth rate reduces.

DOGS

This is the combination low relative market share and low growth rate.

Dogs are low-growth share, low-share businesses and products. They may generate enough cash to maintain themselves, but do not have much future. Sometimes they may need cash to survive. Dog’s holder must minimize by means of divestment or liquidation.

After a firm, has classified its products or SBUs, it must determine what role each will play in the future.