Strategic Business Portfolio Analysis

BCG Growth-Share Matrix

Developed by the Boston Consulting Group (BCG)

 

 BCG Growth-Share Matrix SBU business portfolio analysis

 
 

What Is BCG Growth-Share Matrix

BCG developed a portfolio analysis tool that helps managers develop organizational strategy based on market share of businesses and the growth of markets in which businesses exist.

  

Strategy Management

GE Multifactor Business Portfolio Matrix

  

 
 

Strategic Business Units (SBUs)

The first step in using the BCG Growth-Share Matrix is identifying the organization’s SBUs

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Characteristics of Strategic Business Units (SBUs)

▪ It is a single business or collection of related businesses

▪  It has its own competitors

▪ It has a manager who is accountable for its operation

▪ It is an area that can be independently planned for within the organization

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A strategic business unit is a significant organization segment that is analyzed to develop organizational strategy aimed at generating future business or revenue.

Exactly what constitutes an SBU varies from organization to organization. In larger organizations, an SBU could be a company division, a single product, or a complete product line. In smaller organizations, it might be the entire company. Although SBUs vary drastically in form, they have some common characteristics. All SBUs are a single business (or collection of businesses), have their own competitors and a manager accountable for operations, and can be independently planned for.

  

 
 

Categorizing SBUs

After SBUs have been identified for a particular organization, the next step is to categorize each SBU within one of the following four matrix quadrants:

 

Strategic Management

Resource-based Model

  

 
 

Stars – SBUs that are “stars” have a high share of a high-growth market and typically need large amounts of cash to support their rapid and significant growth. Stars also generate large amount of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns.

Cash Cows – SBUs that are cash cows have a large share of a market that is growing only slightly. These SBUs provide the organization with large amounts of cash, but since their market is not growing significantly, the cash is generally used to meet the financial demand of the organization in other areas, such as the expansion of a star SBU.

Question Marks – SBUs that are question marks have a small share of a high-growth market. They are dubbed “question marks” because it is uncertain whether management should invest more cash in them to gain a larger share of the market or deemphasize or eliminate them. Management will chose the first option when it believes it can turn the question mark into a star, and second when it thinks further investment would be fruitless.

Dogs – SBUs that are dogs have a relatively small share of a low-growth market. They may barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs.

 

 

 
   

Keep growing!

 

  

 
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