Q 366. Product Portfolio Matrix is a very famous tool used to evaluate the product and service lines of an organization. Explain it along with the four categories - Cash Cows, Dogs, Question Marks and Stars. In which category would you expect DMAIC and DMADV projects to be taken up?

 

 

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Product portfolio Matrix is a strategic tool to analyze business with Growth potential and Market reach.
It has four quadrants:-  Dog, Question Mark, Stars and Cash cow. Let's have a look on them.

Dog products: Dog products are with low Market share and Low cash generation so ideally they are eating the resources but return is less. Low ROI
Question Mark: These are the products which are having low market share but high growth opportunity. They may be converted into stars depending upon the investments and focus
Stars: These are the products which generates high ROI . These products are having high Market share as well as high Growth Potential.
Cash Cow: These products are in low growth category but high market share. These are making cash for the company.

Ideally Dogs should be removed from portfolio and Cash cow needs Low focus. 
Lean projects i.e. DMAIC or DMADV should be taken for stars and Question mark.

Product Portfolio Matrix:

Product portfolio matrix is planned to help with long-term strategic planning, to assist a business consider growth opportunities by evaluating its portfolio of products to conclude where to invest, to discontinue or develop products.

 

It is divided into four quadrants based on an analysis of merchandise growth and relative market share.

 

1.  Dogs

2. Question marks

3. Stars

4. Cash cows

1. Dogs: These are outcome with low growth or market share. The normal marketing advice is to eliminate any dogs from your outcome portfolio as they are a demand on resources. Dogs are those product thread with low market share in markets with small to no growth potential. They are excessive cost product lines that are often seen as unload the company’s resources.

 

2. Question marks: Products in excessive growth markets with low market share. These products often require remarkable investment to drive them into the star quadrant. The challenge is that lot of investment may be needed to get a return. Question marks are products with low market share sold into high growth markets. While there is a potential for these product lines to enlarge, the company should invest heavily to increase brand awareness. While the company may have a rigid product offering, it should ultimately decide whether to continue to go after the market, or let the product offering die

 

3. Stars: Products is in high growth markets with high market share. It Can be the market leader though essential ongoing investment to support. They bring about more ROI than other product categories. When thinking of “stars” imagine of those product lines whose market share is high in a high growth market. These stars need a consistent rush of capital to continue their momentum. A star can be observing the company’s “flagship” product line. If it maintains its high market share, then it will no prolonged require as much capital and will eventually become a “cash cow”.

 

4. Cash cows: Product is in low growth markets with high market share. The simple rule here is to ‘Milk these outcome as much as feasible without killing the cow! frequently mature, well-established products. When thinking of cash cows, imagine of those product lines have high market shares but are in a market with small to no growth. These are often mentioned to the company’s mature product lines and ones that need minimal investment of capital. 

 

Product Portfolio Matrix is a very famous tool used by most of the companies to decide the product portfolio of their products basis the market share of products and growth rate potential. This tool is also known as the BCG (Boston Consulting Group) Matrix and was developed by Bruce Henderson (Founder and CEO of BCG) in 1968. This matrix is used by more than half of Fortune 500 companies and is still one of the central point in business school teachings on strategy.

This matrix helps businesses to develop the long term strategic planning and is a torchbearer in deciding products to keep and invest, discontinue or develop in the long run. It is divided into four quadrants (2*2) based on market growth and relative market share as depicted below (It's also known as Growth Share Matrix) :

1. Dogs: These are the products with low growth and low market share. Normally, expert advice here is to remove dogs from your portfolio as they are a drain or waste of resources. For example, Sony Digicam can be placed into 'Dog' category at present because every phone has a good camera now a days and hardly anyone buys them now. However it may not be always true and to quote an example here from automobile sector, in case company decides to discontinue some of the car models (dogs) however there is still a need of the spare parts and hence spare parts production operations can be continued with very less efforts and investments which may emerge as a new revenue stream for the company.To avoid over-investing in your question marks, ensure that all products in your portfolio have clear business goals and use the right KPIs to track product performance.

2. Question marks : These are products in high growth markets with low market share. As the name suggests, these products can be in early stage of development and we are not sure (question mark) if they will turn into stars or may also end up falling into the dog quadrant. These products often require significant investments to push these into the star quadrant. For example, while working on a new car model, the design department works on a large number of design options and out of those only a few or one only go for the final production. Then, there are marketing and advertising expenses involved to move this new product to 'Star' quadrant. However, on the other hand if design chosen is bad and is launched without doing proper pre launch study, it may end up falling into 'Dog' quadrant too.

3. Stars: These are products in high growth markets with high market share and these products are usually the market leaders. However, significant investment may be required in them to sustain the 'Star' position. E.g. Google which is a leader in many of its services e.g. Search, Marketing & Advertising etc. and is in 'Star' quadrant, however Google keeps on investing in their R&D efforts and new technologies to stay ahead of the competition and keep on launching the new products & features and enhancing the existing ones with help of new technologies like AI, Machine Learning etc. (Recommendations display while doing Search)

4. Cash Cows: These are products in low growth markets with high market share. Approach here that is often followed is - Milk the cow as much as possible without killing the cow ! These products are often well established products. E.g. In FMCG sector, we have certain soft drink brands (Pepsi, Coca Cola etc.) which have high market share in India but as people are becoming more and more health conscious and are avoiding eating junk food and taking these drinks, these companies are milking these well established products as much as possible by spending on Advertising, Packaging, Offers etc.

Though this tools is popularly used and huge benefits for deciding the right product portfolio mix, there are certain limitations / drawbacks as well as given below (one shall keep in mind while using this) : 

i) This neglects the effects of synergies between business units / streams
ii) High market share is not the only success factor for decision
iii) Market growth is not the only indicator for attractiveness of a market
iv) A high market share does not necessarily lead to profitability every-time
v) The model uses two dimensions only – market share and growth rate. This may result into emphasize on a particular product, or to divest prematurely.
vi) A business with a low market share can be profitable too so what to be done in that case
vii) The model neglects the small competitors those have rapidly growing market share

 

In my opinion, Six Sigma Projects can be taken up in any of these categories as Six Sigma methodology is an approach of problem solving and it can be used at any stage of product life-cycle (figure below) :

 

In Dogs category, six sigma principles (DMAIC / DMADV) can be utilized to identify the root causes of low market share and appropriate solutions post analysis can be deployed to address the same however as business benefits will be quite less in this category due to low growth potential; companies may not be really interested in taking up such projects. 

For Questions Marks Category, DMADV / DAMIAC approaches can be used for better design of the products and increasing their potential to become stars. Here the potential is high with high business benefits, therefore most of the organisations will be interested in launching such projects at this stage to attain the leader position for their new products. 

For Stars Category, Six Sigma projects (DMAIC / DMADV) can be initiated to retain or increase the high market share with development of new design / concept that can help the product to retain the leader's position in long run by generating the higher revenues. As Business benefits are again high here, companies would be very much interested in launching such projects. 

For Cash Cows Category, since company already has the high market share for the product; six sigma projects can be taken up to reduce the cost and also to improve the design if possible which may help the product to retain its high market share.

So if I have to order the priority of the projects, Question Marks & Stars must be top priority due to huge growth potential ahead followed by Cash Cows and Dogs (We may not even take up for 'Dogs' category due to less benefits but high costs involved) .

The Product Portfolio Matrix helps to achieve the right mix of the products Organizations can offer in the Market to Maximize the Market share. This Matrix distribute the Products under 4 broad Categories, which are called Question Mark, Stars, Cash Cows and Pets (also called as Dogs). The below image depicts the 4 quadrants and Product types, Cash cows are represented by $ Sign and Pets are represented by (x) cross mark.

 

 

Question mark (?) They are the Products which very high Growth rates

however don’t yet deliver the significant business results by generating Revenue, selling different products or services, enhancing the brand equity or saving money.

 

Stars (*) covers the high growth Products and deliver the desired benefits to the Business. Products in the Stars quadrant are market-leading products and require huge investment to retain their market position/share, boost growth, and to maintain a competitive advantage.

 

Cash cows ($ Sign) under this quadrant products characterized by low growth, but they offer plenty of business benefits. Products in the cash cows are considered as leaders in the marketplace. The product under this group have a significant amount of investments and do not require any further investments to be done to maintain their position in the Market.

 

Pets (x Mark) are the quadrant that exhibits a low growth and offer very few benefits. Products in this quadrants able to generate revenue however growth is very limited and these products gradually phased out or to be re-designed to relaunch in the Market.

 

DMAIC – Projects can be taken up for Question Mark, Products in this quadrant are in a market that is growing quickly but where the product(s) have a low market share.  So we can do necessary Analysis and come up with Improvement opportunities to increase the Market Share.

 

DMADV – Projects should be taken up in Pets, Products in this quadrant are in a market that is growing slowly and where the product(s) have a low market share.  DMADV methodology should help to re-design and redeploy the Projects in Markets to gain better share.

 

 

Edited May 23, 20215 yr by Suresh Balu
to add additional perspectives

Product Portfolio Matrix

Product portfolio matrix is a method which many organizations utilize to analyze  portfolio of a product,  before  taking any strategic decisions. The common matrix approach is to focus on growth and market share.

The product portfolio matrix, which is also known as growth–share, intends to assist the company to achieve a balanced portfolio, which consists of the right mix of established and  new products.

Research shows that more than 36% of organizations utilizes scoring as an efficient method for product portfolio strategy & management. Scoring appears to be  is one of the most effective tools for companies which prioritizes financial gains.

The matrix is categorized in pictorial 4-quadrant, such as question marks (?), stars (*), cash cows ($),

and pets (x, dogs are commonly used). Below picture shows the matrix with its 4 quadrants and the

product types, whereby dollar sign represents cash cows,  and the cross represents pets.     Quadrant 1: Question marks represents products with high growth, but has not yet deliver significant benefits — in the sense of generating revenue, enhancing  brand equity, saving money, selling other products/ services.  Quadrant 2:  Stars indicates high growth and delivers desired benefits.  DMADV suits in this quadrant.  Quadrant 3: Cash cows products are characterized as low growth, but they do offer huge business benefits. DMAIC suits in this quadrant.  Quadrant 4: Pets, shows low growth and provides little benefits.

Product Portfolio Matrix : 

 

A portfolio matrix is a representation of products or process  in a matrix of 2x2 assisting us to understand , map, prioritize and help us take decisions accordingly.

 

As an example, I want to share below one such analysis which was done in 2012 by Gartner on the completeness of vision an ability to execute. The chart is for growth in the industry either being leaders, challengers, niche players and visionaries. Organization is being analyzed and mapped on the matrix in terms of their Vision and ability to execute in the infrastructure utility services.

 

 

Identifying the few from the many.

 

I would like to share an other example of the process related as I have not worked on Product matrix. Sharing only a template for the understanding purpose

In order to identify which of the process are ready to move into productivity improvement, we at our organization came up with 2x2 Productivity priority matrix where we tried to map in  High Business impact process Vs Ease of Measurement. With this prioritization of the process we could get the footprint.

With the available resources and time we could clearly identify the few process which are business critical and easy to measure and hence it helped in convincing the leaders to get started with the vital few process.

 

 

It is important to be aware that this exercise is not one time. It will time bound and hence will have to re-do this every time a decision has to be made. A comparison with references to earlier matrix can also differentiate the changes over a period of time.

Product Portfolio Matrix/ BCG Matrix or Growth-Share Matrix

 

Product Portfolio matrix is also know as BCG or Growth – Share Matrix. Each organization needs to understand and regularly asses if the products they offer to the market is profitable or not. This helps in driving efficiency and they can use the resources efficiently.

BCG Matrix is developed of Boston Consulting Group will help you to understand the value of the products and growth share. It is also called as growth share matrix and it’s a portfolio planning model and analyse the products.

BCG Matrix is classified as: Cash cows, Stars, Question Marks and Dogs

  

Each category represents each kind of product in the portfolio.

 

Stars: Products with High Growth and High Market Share. These products will have a higher market share and they will bring more profit to the business and high growth potential. As the business gets matured it will become cash cows and they will hold a big market share but growth wil be less. SO as a remedy we need to find innovative products to develop new stars to the market.

 

Cash Cows: Product with Low Growth and High Market Share. These are the products with significant return of investment but they will lack innovation and growth. They will be the source of profit for the organization. They will provide the capital for Stars and question marks.

 

Dogs: Products with Low Growth and Low Market Share. These are the products which will not have any cashflow or they wont be required any investment too. It wont be advisable to invest in them they will neither generate cash nor market share.

 

Question Marks: Products with High Growth and Low Market Share. For question marks we will have high growth potential and low market so it will be possible to increase the growth with right strategies and investments

 

Positives

·        Easy to comprehend

·        Monitor the opportunities available to prioritize it

·        Identify sources of profit and to increase it

·        Resource optimization

Negatives

·        Only two factors are identified and analyzed which is market share and growth rate.

·        Doesn’t tap the sources with low market

·        Small competitors are not considered

 

Dmaic - Question mark and cash cows as there is an opportunity for improvement 

DMADV - Dogs as there is no growth and no profit. we can re-design this projects 

Product portfolio matrix, is a business strategic planning tool used to find the strategic position of a company brand portfolio.
It denotes the product and/or services into a two-by-two matrix. Each quadrant of the matrix is arranged as low or high performance, depending on the relative market share and market growth rate.
The horizontal axis of the Matrix denotes the amount of market share of a product and its strength in the particular market.

The vertical axis of the Matrix denotes the growth rate of a product and its potential to grow in a particular market.

 

The four quadrants in the Matrix is:

Question marks: Products or services with high market growth but a low market share in the business environment.
Stars: Products or services with high market growth and a high market share  in the business environment..
Dogs: Products or services with low market growth and a low market share  in the business environment..
Cash cows: Products or services with low market growth but a high market share in the business environment..

 

Question Marks:
Products/services in the question marks quadrant are in a market that is become improving fast but where the product(s) have a low market share. Question marks are the most control of intensive products and require extensive investment and resources to increase their market share. Investments in question marks are usually funded by cash flows from the cash cow quadrant.

 

Dogs
Products/services in the dogs quadrant are in a market that is slowly improving and where the product(s) have a low market share. Products/services in the dogs quadrant are able to sustain themselves and provide cash flows, but the products/services will never reach the stars quadrant. Company usually phase out products in the dogs quadrant.

 

Star
Products/services in the star quadrant are in a market that is fastest growing and one where the product(s) have a high market share. Products/services in the stars quadrant are market-leading products/services and it require most priority investment to retain their market position, boost growth, and maintain a competitive advantage.

 

Cash Cows
Products/services in the cash cows quadrant are in a market that is growing slowly and where the product(s) or services have a high market share. The products/services already prioritized and have a significant amount of investments in them and do not require significant further investments to maintain their position.

The Product portfolio matrix tool helps to make right product portfolio decisions.

The product portfolio matrix also called growth –share and BCG matrix.

This helps how the decisions can effectively apply it to manage portfolio

The matrix categorizes products as

·        Question marks

·        Stars

·        Cash cows

·        Pets (also known as dogs).

Question Mark indicates High Growth, Low Market shares (basically uncertainty)

Pets also known as Dogs: Low growth, Low market shares (Less profitable)

Stars: High Growth, High Market shares (High competition)

Cash cows: Low growth, high market shares ( most profitable)

Quick view and interpretation

Question Mark High Growth, Low Market shares Don’t know the opportunities;  Decide to increase the investment	Stars High Growth, High Market shares Doing Good. Good opportunities.
Dogs Low growth, Low market shares (Less profitable) Not doing great in market. Difficult to make profit	Cash cows Low growth, high market shares ( most profitable) No growth but having good opportunities

 

Question mark,  cash cows we can consider for DMAIC where the improvement can give the better results.

Dogs : we can consider for DMADV because there is no growth and no profit. we can re-consider this projects 

 

While all answers have explained the Product Portfolio Matrix, many answers have missed out on the second part of the question. Rahul's answer covers all the aspects of question and his answer also highlights key areas within each category where DMAIC / DMADV projects can be initiated. Hence his answer is selected as the winner.

 

•  The Product portfolio matrix helps to make right product portfolio decisions. The product portfolio matrix also called growth share and BCG matrix. Its a 2 *2 matrix. 

The horizontal axis of the Matrix denotes the amount of market share of a product and its strength in the particular market.

The vertical axis of the Matrix denotes the growth rate of a product and its potential to grow in a particular market.

 

The matrix categorizes products as

·        Question marks :High Growth, Low Market shares (basically uncertainty)

·        Stars : High Growth, High Market shares (High competition)

·        Cash cows :Low growth, high market shares ( most profitable)

·        Pets (also known as dogs). Low growth, Low market shares (Less profitable)

 

 

There fore in all categories Question mark,  Stars, Cas Cow  , Dogs they can be considered for Six sigma of DMAIC & DMADV approach , however Question Marks & Starts become the top priority on account of their huge growth potential , followed by Cash Cows . Dog category can be exempted due to less benefits but high cost involvement 

A product Portfolio Matrix also known as BCG matrix help to achieve the correct mix of new & established products in order to maximise the overall value of a company’s portfolio. It s simple matrix that categorizes the products on the basis of: A Product’s market share & its overall market growth.  

This matrix categorizes the products as Question marks, Stars, Cash Cows & Dogs.

 

 

Question Marks:

Products of this category are in a growing market with low market share. They are the most intensive products and required extensive investments and resources to increase the market share. Investments in this group are typically funded by Cash flows from Cash flow quadrant. A firm ideally wants to turn the question marks into Stars. With market declines, the question marks end up becoming dogs.

 

Stars:

Products in this quadrant are the ones which are growing quickly and have high market share. They are the market leading products which require high investments to retain their market position, increase growth and maintain the competitive advantage.

Stars consume a high amount of cash but also generates large cash flows. As a market matures and products continue to remain successful, stars migrate to become cash cows. Stars are any comoany’s prized possession and in top of a firm’s product portfolio.

Cash Cows:

Products in this quadrant are in a slow growing market where they have a high market share. These products are thought of as leaders in the marketplace. The products have a significant investment in them and do not required further investments to maintain their positions.

Cash flows generated by cash cows are high and used to finance stars and question marks. Products in this quadrant are ‘milked’ and companies invest as little cash as possible while reaping profits from the products

 

 

 

Dogs:

Products in this quadrant are in a slow growing market and products have a low market share too. These products are able to sustain themselves and provide cash flows but the products never reach the stars quadrant. Firms generally phase out products in dogs quadrant unless these are complimentary to other =existing products or are used for competitive purposes.

 

Dollar sign is a representation of Cash cows & Cross is a sign for Dog

 

 

As a methodology, DMADV should be implemented when A product or process is not in existence in the company and it needs to be developed. Hence the DMADV can be applied at the STAR stage.

DMAIC is implemented when the product or process is existing and has been optimized but does not meet the level of customer specification or Six Sigma levels. Hence DMAIC can be applied at Question Mark stage:

The Question marks have a higher growth potential and a low market share which makes their future potential doubtful.

Since the growth rate of products is high in this quadrant, they can become cash cows and ultimately stars with the right strategies and investments. However, with low market share - any wrong investments can downgrade them to Dogs even after lots of investment.