The BCG portfolio matrix distinguishes between 4 different fields – dogs, cash cows, babies, and stars. Dogs refer to products with low market share and low growth, so this products should only be kept in the portfolio if they still produce profit. Cash Cows are not attractive on the market so we should not invest in these products. But companies are going to keep them in there portfolio as long as some profit is possible. Babies are attractive on the market so further investment can lead to future earnings. But there might be some risk addicted to these products. The stars should be the main business of a company and earn the highest profit. It is advisable to invest in these products.
Figure 3: Different fields of action in the portfolio matrix5 The portfolio matrix of McKinsey is seperated into nine fields. The recommended strategies are quite similar to the strategies recommended by the BCG. The main strategies are draw back, extension and milking. Draw back and extension are self describing. The extension with the questionmark simply says that an extension involves both risk and chance of success and has to be questioned seperately. The term milking stands for capitalizing products of low attractivity and high market share as long as profitable.
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Haberfellner (2009)
REFERENCES Ansoff, I.: Strategies for Diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957, pp. 113-124. Stone, P.: Make marketing work for you: boost your profits with proven marketing techniques, How to Books Ltd, UK, 2001. Mercer, D.: Marketing, Blackwell Publishers Inc, 2001. Bartscher, S. / Bomke, P.: Einführung in die Unternehmenspolitik; Schäffer Poeschel, 1993 Tutor2u, strategy - portfolio analysis - ge matrix, URL: http://tutor2u.net/business/strategy/ge_matrix.htm, visited March 22, 2010 Haberfellner, R.: General Management and Organization Lecture Notes, Institute for General Management and Organization, Graz University of Technology, 2009
