The different parts of a company are called Strategic Business Unit. It can refer to a division, a product, or a brand
within the company.
A marketer may need to assess them by doing a portfolio analysis. This paper tells you where to invest and what you can expect from your company in the following years by categorizing them in order of attractiveness and strength in terms of market share.
The most famous way to deal with this is the Boston Consulting Group approach.
By using a matrix, you can classify the SBUs in 4 types. Stars, Cash Cows, Question Marks, and dogs.
The star is your best product. It has high growth, and high market shares. They need high investment to finance their rapid growth.
The cash cows are usually stars that has seen its growth rate decline. They are established successful SBUs, and need less investments. As they have high market shares, they produce a lot of cash, and the company can use this cash flows to cover the bills of the other SBUs that need investments.
The Question Marks are new products that are positioned in high growth market. The company has to assess wether it continues investing and make it become a star, or wether it should be left aside.
Finally, dogs are low growth, low share businesses, that may generate enough to survive, but do not promise to become a source of profit.
With this approach, you have to chose a strategy different according to the product. You can build a share of a business unit by investing. You can invest enough to maintain the SBUs share level the same over time to hold. You can also harvest the SBU, for example with the cash cows, milking for the short term cash flows. Finally, you can divest the SBUs by phasing it out and using the investments elsewhere.
Now you have to be careful with this approach. It can be difficult to assess and define the SBUs. You may find it time consuming and costly. Measuring their market share and market growth can be hard. Also, it makes it true for a specific time, but whenever the whole system change, the matrix must be reevaluated. As a result it becomes hard for future planning.
A marketer may need to assess them by doing a portfolio analysis. This paper tells you where to invest and what you can expect from your company in the following years by categorizing them in order of attractiveness and strength in terms of market share.
The most famous way to deal with this is the Boston Consulting Group approach.
By using a matrix, you can classify the SBUs in 4 types. Stars, Cash Cows, Question Marks, and dogs.
The star is your best product. It has high growth, and high market shares. They need high investment to finance their rapid growth.
The cash cows are usually stars that has seen its growth rate decline. They are established successful SBUs, and need less investments. As they have high market shares, they produce a lot of cash, and the company can use this cash flows to cover the bills of the other SBUs that need investments.
The Question Marks are new products that are positioned in high growth market. The company has to assess wether it continues investing and make it become a star, or wether it should be left aside.
Finally, dogs are low growth, low share businesses, that may generate enough to survive, but do not promise to become a source of profit.
With this approach, you have to chose a strategy different according to the product. You can build a share of a business unit by investing. You can invest enough to maintain the SBUs share level the same over time to hold. You can also harvest the SBU, for example with the cash cows, milking for the short term cash flows. Finally, you can divest the SBUs by phasing it out and using the investments elsewhere.
Now you have to be careful with this approach. It can be difficult to assess and define the SBUs. You may find it time consuming and costly. Measuring their market share and market growth can be hard. Also, it makes it true for a specific time, but whenever the whole system change, the matrix must be reevaluated. As a result it becomes hard for future planning.
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