Discuss the
corporate portfolio matrix and the Boston Consulting Group (BCG) matrix.
Answer:
When an
organization's corporate strategy encompasses a number of businesses, managers
can manage this collection, or portfolio, of businesses using a tool called a
corporate portfolio matrix. This matrix provides a framework for understanding
diverse businesses and helps managers establish priorities for allocating
resources.
The first
portfolio matrix—the BCG matrix—was developed by the Boston Consulting Group
and introduced the idea that an organization's various businesses could be
evaluated and plotted using a 2 × 2 matrix to identify which ones offered high
potential and which were a drain on organizational resources. The horizontal
axis represents market share (low or high) and the vertical axis indicates
anticipated market growth (low or high). A business unit is evaluated using a
SWOT analysis and placed in one of the four categories: dogs, cash cows, stars,
and question marks.
a. Dogs -
They should be sold off or liquidated as they have low market share in markets
with low growth potential.
b. Cash
Cows - These have low anticipated growth rate but high market share. Managers
should"milk" them for as much as they can, limit any new investment
in them, and use the large amounts of cash generated to invest in stars and
question marks with strong potential to improve market share.
c. Stars -
These have high anticipated growth rate and high market share. Heavy investment
in stars will help take advantage of the market's growth and help maintain high
market share. The stars eventually develop into cash cows as their markets
mature and sales growth slows.
d. Question
Marks - These have high anticipated growth rate but low market share. The
hardest decision for managers relates to the question marks. After careful
analysis, some will be sold off and others strategically nurtured into stars.
Source: Management, 11e
(Robbins/Coulter)
Project portfolio management requires optimizing your portfolios to discover the most valuable set of projects to execute within your constraint limitations such as limited money, time, resources, and risk tolerance. In addition, a good project portfolio optimization tool should be able to integrate project dependencies such as "Project B" can only be executed if "Project A" is executed first.Online Accredited Financial Portfolio management advisor
ReplyDeleteBCG matrix is to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories. For understanding this, BCG Matrix Examples resources are essential.
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