Bcg Matrix Strategic Management the Bcg Matrix:

BCG Matrix

Strategic Management

The BCG Matrix: An overview and a hypothetical situation

The Boston Consulting Group (BCG) Matrix is an efficient way to visually represent a company's portfolio of goods and services, and provides a way for organizations to evaluate their strategic possibilities. The BCG Matrix classifies a company according to three primary business interests or units (BCG Matrix, 2012, Net MBA). The Matrix is represented in the form of four quadrants: stars, question marks, dogs, and cash cows.

tars,' which are located in the upper left quadrant of the BCG 'box,' are relatively self-explanatory. They are popular goods and services with a large market share. However, the problem with stars is that they are very demanding, cash-wise and time-wise, for the organization (much like 'stars' in real life, hence the name). The organization profits off the branding and positive buzz that stars generate but the stars generate little real cash (BCG Matrix, 2012, Net MBA). The hope is that through economies of scale, a star can eventually become a 'cash cow.' Dogs, located in the lower right quadrant, rather than nurtured like stars, should be done away with because they have little market potential and generate little cash flow. They do not divert many resources from the organization, but they are simply not worth the money required to sustain them. Dogs are not costly -- but not very profitable either (BCG Matrix, 2012, Net MBA).

In this scenario, however, the question of how to deal with 'cash cows' and 'question marks' is at issue. The company's electronics division is located in the upper right quadrant of the matrix as a question mark and the appliance division appears in the lower left quadrant of the matrix as a cash cow. Cash cows are the bread and butter of company and create more cash than required to sustain them (BCG Matrix, 2012, Net MBA). Cash cows must be 'milked' or used to generate the maximum amount of cash possible to fund other ventures. A company cannot remain 'sitting still' in the midst of contentious market activity, particularly a technologically-oriented company, and must always keep its eye upon the potential to generate the 'next new thing,' just as Apple is always trying to create new products to delight the consumer's appetite for the new -- the company has achieved such deep market penetration by trying to constantly anticipate customer's new wants and needs, even before the customer is aware of them, and before the competition can challenge Apple's diverse lines of products (Paschal 2012).

Thus, the appliances or 'cash cows' should be milked for all they are worth to support the transformation of current stars into new cash cows -- but also potentially to do further research into the 'question marks' located in the upper right corner. In this instance, the 'question marks' are electronics. Question marks are growing rapidly but require a great deal of organizational resources to sustain, and because they are young they generate little revenue (BCG Matrix, 2012, Net MBA). The company must keep an eye upon this division, since it has the potential to generate a great deal of revenue, but could also be a cash drain. Given the technologically-focused society we live in, where electronics are so important to so many people, this sphere could have growth potential, if it is supported by the cash presently generated by 'cash cow' appliances. But this rosy scenario is not inevitable, and the company must keep a careful 'watch' upon question marks' future development.