SBU Portfolio, or the BCG Matrix, is a marketing strategy framework for investment decisions, which strategic business units (SBUs) use to assess growth opportunities across different products/services. The framework consists of two dimensions: relative market share and annual rate of market growth, as explained below.
- dogs (low market share, low growth rate) indicates low or unstable earning, with neutral or even negative cash flow. Companies shall consider divesting from this category.
- cash cows (high market share, low growth rate) provides high stable earnings and cash flow, by which the company finance its new product development
- question marks (low market share, high growth rate) implies low unstable earning and a negative cash flow. The company needs to analyze growth opportunities (i.e., into star) and risks (i.e., toward dogs). If the company decides to invest, it usually uses the cash flow from the cow to finance it.
- stars (high market share, high growth rate) signals potential of high earning and a neutral cash flow.
An example from a vegan restaurant serving both dine-in and take-away orders is depicted below:
- dogs (e.g., dessert: costly to prepare, shorter shall life, infrequent menu item; severe competition from bakery)
- cash cows (e.g., lunch menu and lunch boxes: stable order size, lower inventory cost)
- question marks (e.g., beverage: special purpose equipment and ingredients required, current market leader: bubble tea shops)
- stars (e.g., buns for take-away: high margin, yet requires investment and continuous innovation to remain leadership)
Overall assessment: invest in buns for take-away, divest from dessert. Remain lunch menu and lunch boxes, while considering beverages when the restaurant expands and enjoys better scalability.