The Star, the Dog, the Cow and the Question Mark
A Perspective titled "The Product Portfolio" introduces the growth-share matrix. This framework categorizes products within a company's portfolio as stars, cash cows, dogs, or question marks according to growth rate, market share, and positive or negative cash flow. By using positive cash flows a company can capitalize on growth opportunities.
Question marks are products that grow rapidly and as a
result consume large amounts of cash, but because they
have low market shares they don’t generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and
eventually a cash cow when the market growth slows. If it
doesn’t become a market leader it will become a dog when
market growth declines. Question marks need to be analysed
carefully to determine if they are worth the investment
required to grow market share.
Dogs have a low market share and a low growth rate and
neither generate nor consume a large amount of cash.
However, dogs are cash traps because of the money tied up
in a business that has little potential. Such businesses are candidates for divestiture.
Stars generate large sums of cash because of their strong
relative market share, but also consume large amounts of
cash because of their high growth rate. So the cash being
spent and brought in approximately nets out. If a star can
maintain its large market share it will become a cash cow
when the market growth rate declines.
As leaders in a mature market, cash cows exhibit a return
on assets that is greater than the market growth rate so
they generate more cash than they consume. These units
should be ‘milked’ extracting the profits and investing as little as possible. They provide the cash required to turn question marks into the market leaders.
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