capacity to generate cash. The proposition being, that products with a
dominant position in the market will achieve high sales, but will need
relatively less investment as they are already an established brand and
should have lower costs through economies of scale advantages. Market
growth on the other hand is seen is a predictor of the product’s need for
cash. Products in high growth sectors require investment to keep up
with the increased demand.
The model uses market share relative to competitors as an indication of
the products relative strength in the market. To do this the axis uses a log
scale. At the mid-point of the axis, represented by 1.0 (or 1X) on the scale,
the products market share is equal to its largest competitor’s market share.
At the extreme left-hand side of the axis, represented by 10.0 (or 10X) a
product has 10 times the market share of the largest competitor. At the
other extreme of 0.1, on the axis, the product would only have a tenth or
10 per cent of the largest competitor’s market share.
Products or SBU’s are represented on the model by circles and fall into
one of the four cells into which the matrix is divided. The area of the circle
represents the products sales relative to the sales of the organisation’s
other products. The four cells in the matrix represent:❍ Cash cows: These products have high profitability and require low
investment, due to market leadership in a low growth market. These
products are generating high levels of cash. These products should be
defended to maintain sales and market share. Surplus cash should be
channelled into Stars and Question marks in order to create the Cash
cows of the future. Current Cash cows will inevitably overtime loose
their position as their market changes.
❍ Stars: These are market leaders and so are generating high levels of
cash, but are in areas of rapid growth which require equally high levels
of cash (investment) to keep up with the growth in sales. Cash generated
by the Cash cows should be channelled to support these products.
❍ Question marks: These are also sometimes referred to as Problem Children
or Wildcats. Question marks are not market leaders and will have rela-
tively high costs at the same time these products require large amounts
of cash as they are in high growth areas. An organisation has to judge
whether to use cash generated by the Cash cow to try and develop this
product into a Star by gaining market share in a high growth market or
to invest in other areas of the business.
❍ Dogs: These are products with low levels of market share in low growth
markets. Products that are in a secondary position to the market leader
may still be able to produce cash (Cash dogs). For others the organisa-
tion’s decision is likely to be a choice between moving the product into a
defendable niche, harvesting it for cash in the short term or divestment.The overall aim of an organisation should be to maintain a balanced port-
folio. This means investments should flow from Cash cows into Stars and
Question marks in an effort to make products move round the matrix
from Question marks into Stars and from Stars into Cash cows. This102 Strategic Marketing: Planning and Control