Reasons for management not disposing of a “dog”
Large firms that comprise of different business and products (Business portfolio ) frequently carry out portfolio analysis. This is the process by which management evaluates each business portfolio to determine its current strengths, weaknesses and profitability. The company then uses this information to place its business portfolio into strategic business unit (SBU). “A SBU is a unit of the company that has a separate mission and objectives that can be planned separately from other company business” (kotler & Armstrong, 2007). Based on the SBU’s the company uses a portfolio planning method to establish the positioning and attractiveness of their products. The best known portfolio planning method used is the Boston Consulting group (BCG) approach.
The BCG approach is a growth share matrix used to categorize the company’s SBU’s into four categories based on their growth rate and market share to help the firm in understanding which brands the firm should invest, divest , hold or harvest.
The four categories consist of the Stars, Cash Cows, Question marks and Dogs. These categories each describe an SBU’s position in the firm in terms of growth rate and market share.
Stars are those high-growth, high-share businesses or products. They usually require heavy investment to finance their rapid growth. Over time these SBUs will reduce on growth and eventually turn into “Cash Cows”. Cash cows on the other hand, do not require the same level of support. They are high-share, low growth businesses or product and are generally low maintenance. Therefore, they will generate heavy income that the company will use to pay its bills and support other SBUs that need investment.
Question Marks are low share products or business products that are in a high growth market. They usually require a lot of cash to hold their position in the market, let alone increase it. Management has
References: MARKETING THEORIES – BOSTON CONSULTING GROUP MATRIX. (n.d.).Professional Academy . Retrieved September 19, 2013, from http://www.professionalacademy.com/news/marketing-theories-boston-consulting-group-matrix Kotler, P., & Armstrong, G. (2008).Principles of marketing (13th ed.). Englewood Cliffs, N.J.: Prentice-Hall. BCG Matrix - Meaning and its Limitations. (n.d.). Management Study Guide - Free Training Guide for Students and Entrepreneurs.. Retrieved September 20, 2013, from http://www.managementstudyguide.com/bcg-matrix.htm