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The Disaster Sequenceīruce Henderson, founder of BCG, in his Product Portfolio, explained how in a disaster sequence of cash allocation, excess cash from stars is invested in question marks, that turn into dogs. To triggering a positive loop, those question marks will need to be turned into cash cows, or else they will decay and turn into dogs. The cash flows generated by cows will need to get invested back to question marks, that for the time being, will make substantial cash. In short, stars over time become cash cows, due to market dominance and saturation, thus creating a condition of a product with a slower growth rate, and yet high margins and cash flows. And the abundant cash generated by cash cows will be invested back in question marks, that will need, over time, to become stars, to trigger a positive loop. The Success Sequenceīruce Henderson, founder of BCG, in his Product Portfolio, explained how in a successful sequence of cash allocation, stars over time become cash cows. However, they will have high market shares, thus becoming more stable products, requiring diminishing investments and high cash generation. Yet, they will become large cash generators only when they will turn into cash cows, as their growth rate will slow down. While they are leaders, they generate substantial cash. Stars are high share, high growth products. The only way out is if they become stars, otherwise, they will decay into dogs. They require far more cash than they can generate, otherwise, they will die. Question marks are low market share, high growth products. Pets (dogs)ĭogs are products with low market share and slow growth. Pets are those products that don’t have growth potential, and they don’t generate enough cash to be sustained.Īs Bruce Henderson explained in his piece, all products either become cash cows or pets. According to The Product Portfolio theory, cash should be invested back in cash cows only to maintain them, but most of the excess cash produced by cash cows should be invested in new products (question marks, see below), which have the potential to become cash cows in the future. They generate cash in excess for what it takes to maintain the market share.
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Other strategy frameworks to use in conjunction with the BCG Matrix.
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Assumptions underlying the Product Portfolio theory.Digital Business Models Podcast by FourWeekMBA.Business Strategy Book Bundle By FourWeekMBA.An Entire MBA In Four Weeks By FourWeekMBA.100+ Business Models Book By FourWeekMBA.
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