Bcg Recommendations

Recommendations

Based on the BCG analysis, company has to decide what objective, strategy and budget should be assigned to each strategic business unit (SBU). Several general investment strategies may be recommended as below:

Stars in the BCG matrix have high-market shares in high-growth markets. They produce large profits through substantial penetration of expanding markets. The preferred strategy for Stars is growth, the BCG matrix recommends making further resource investments in them. Stars can self-sustaining the cash flow or require funds from other SBUs such as Cash Cows. Stars are not only high performances in the present, they offer future potential to do the same or even more so.

Cash Cows have high-market shares in low-growth markets. They produce large profits and a strong cash flow, but with little upside potential. Because the markets offer little growth opportunity, the preferred strategy for Cash Cows is stability or modest growth. Cash Cows have positive cash flow therefore BCG matrix advises firms to generate cash funding for investing in other more promising SBU such as support Stars and Question Marks.

Question Marks have low-market shares in high-growth markets. Although they may not generate much profit at the moment, the upside potential is there because of the growing markets. Question Marks make for difficult strategic decision making. The BCG matrix recommends Question Marks make selective develop into Stars which give the most promising for growth, while the uncertain Question Marks should be divest to reduce the demand on cash. The part of the Cash Cows' revenues would strengthen the positions of Question Marks that have the potential to become Stars. In that case, a company increases its market share substantially.

Dogs have low-market shares in low-growth markets. They produce little profit and low potential for future improvement. The preferred strategy for Dogs is divestiture strategy in order to reduce capacity and free up...