The Boston Consulting Group (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.
2
Basic Business Growth Strategies
Competitive
Strategies: 2 Types
3 Strategies of Market Leaders
Strategic Business Units
(SBUs)
The first step in using the BCG
Growth-Share Matrix is identifying the organization’s
strategic business units (SBUs). 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.1 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:
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.
