The conceptual framework of
Boston Consulting Group is based on a market share matrix which is strategic
planning tool designed to aid fundamental decisions and actions that shape and
guide what a business organization is, what it does, and why it does it. The
objective of this strategic planning tool is to develop a map by which to
manage an organization’s positioning. An example of market share matrix is
shown in the diagram below.
Boston Consulting Group is based on a market share matrix which is strategic
planning tool designed to aid fundamental decisions and actions that shape and
guide what a business organization is, what it does, and why it does it. The
objective of this strategic planning tool is to develop a map by which to
manage an organization’s positioning. An example of market share matrix is
shown in the diagram below.
A Star: A star
product / service or unit is that which has a high market share position in a
high growth market. It grows rapidly and because of this it needs enough
injection of cash to maintain its leadership position in the market. Star also
generates large amounts of cash but which it also consumes to maintain its
position. That is the cash flows of the star are in balance state. But the star
still offers the best opportunity for expansion as it enjoys high profits and
growth opportunities. For a company like Nigeria Breweries Limited one might
say its star product is Maltina.
product / service or unit is that which has a high market share position in a
high growth market. It grows rapidly and because of this it needs enough
injection of cash to maintain its leadership position in the market. Star also
generates large amounts of cash but which it also consumes to maintain its
position. That is the cash flows of the star are in balance state. But the star
still offers the best opportunity for expansion as it enjoys high profits and
growth opportunities. For a company like Nigeria Breweries Limited one might
say its star product is Maltina.
Cash Cow: Cash cow
product, service or unit is one with high market share position in a low growth
markets. Because of its high market share it operational cost is low and high
profit and cash flow generation. Reinvestment cost is low due to the slow
growth of the market. Cash cows generate the highest levels of cash which are
then used by the company to finance overheads, dividends and new investment for
the company as a whole. Considering cash flow point of view cash cows are the
most important products / services / units in any organization and must be
accorded full attention at all times. The cash cow for the Nigeria Breweries
Limited is STAR large beer.
product, service or unit is one with high market share position in a low growth
markets. Because of its high market share it operational cost is low and high
profit and cash flow generation. Reinvestment cost is low due to the slow
growth of the market. Cash cows generate the highest levels of cash which are
then used by the company to finance overheads, dividends and new investment for
the company as a whole. Considering cash flow point of view cash cows are the
most important products / services / units in any organization and must be
accorded full attention at all times. The cash cow for the Nigeria Breweries
Limited is STAR large beer.
The Question Mark: This is a product / service / unit that enjoy very
low share of the market with a high growth. It is the worst from the cash flow
point of view because of its very high cash requirements to enable it gain
market share. It only generates very little cash. However, since its growth
rate is high, it is easy to gain market share that will convert it to a star
and eventually into a cash cow. Shandy and Rex large beer are still question
marks for Nigeria Breweries Limited
low share of the market with a high growth. It is the worst from the cash flow
point of view because of its very high cash requirements to enable it gain
market share. It only generates very little cash. However, since its growth
rate is high, it is easy to gain market share that will convert it to a star
and eventually into a cash cow. Shandy and Rex large beer are still question
marks for Nigeria Breweries Limited
A Dog: A dog
has no good market share nor is it in a growing market. It has a very meagre,
poor and insignificant profit contribution if at all there is any (its profit
contribution, is therefore very poor indeed), it may even need cash injection
to survive considering its weak competitive position and probably intending
situation in the market. All dogs should be eliminated either through liquidation,
discontinuance or divestment.
has no good market share nor is it in a growing market. It has a very meagre,
poor and insignificant profit contribution if at all there is any (its profit
contribution, is therefore very poor indeed), it may even need cash injection
to survive considering its weak competitive position and probably intending
situation in the market. All dogs should be eliminated either through liquidation,
discontinuance or divestment.
