Have you ever
realized how many businesses and products there are within a large company like
ESPN? ESPN has a vast business portfolio, which includes their TV channels,
ESPN Radio, ESPN.com, ESPN The Magazine,
ESPN Zone restaurants, and apparel among many others. With so many separate
entities to manage, market, and finance, it can likely be very confusing at
times to distinguish between all of the products and businesses. That is why
analyzing your business portfolio is key in understanding where each business
and product stands within your company. Analyzing your business portfolio even
allows you to understand things like how and when to market to your target
audience.
So how do you
analyze a business portfolio? There are a few ways, but in this post I am going
to discuss the Boston Consulting Group (BCG from now on) growth-share matrix
(see Figure 1 below). The first step in this type of analysis is to identify a
company’s key businesses, or strategic business units (also known as SBUs). The
next step is to place each SBU into a category based on its market growth rate
and relative market share. There are four categories that the SBUs can be
placed into: stars, cash cows, question marks, and dogs. Stars are high-growth,
high-share businesses and products while cash cows are low-growth, high-share
businesses and products. Question marks are in high-growth markets but have
low-share. Lastly, dogs are low-growth, low-share products and businesses.
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Fig. 1: The Boston Consulting Group Growth-Share Matrix |
To look into the BCG growth-share matrix in order to gain a better understanding of how it works, let us continue to use ESPN as an example. Let us start with identifying some cash cows. The ESPN television channel, namely their flagship program Sportscenter, is certainly a cash cow because the level of market growth is low because the program has been established in the market for a long time. It is also a cash cow because its relative market share is very high. Since Sportscenter has been established since the late 1970s, people are very familiar with the program and it has become the main hub of sporting news in the United States.
As for the star
category, ESPN.com is one of ESPN’s biggest stars. Since the Internet is still
a relatively new medium in terms of history, there are always rapid
developments when it comes to online experiences. ESPN.com is high-growth
because the Internet’s capabilities grow every day, allowing ESPN to add more
and more interactive content to their website. The website is also high-share
because ESPN has established itself as a frontrunner in sporting news and
information through its television channel, which causes people to migrate to
the online version of ESPN for even more information.
Question marks
are an interesting category of the BCG growth-share matrix. They are the new,
up-and-coming businesses and products of a company that have high potential to
succeed but also high potential to fail. They may become stars and then cash
cows someday. For example, ESPN started as a television network first in 1979.
In 1979, there were many doubters of the idea of a 24/7 sports channel. Many
did not think it would succeed. ESPN was a question mark. It had great potential
and eventually took off thanks to Sportscenter.
As it grew, ESPN and Sportscenter
became stars and then reliable cash cows once their market matured.
A dog of the
ESPN portfolio is ESPN The Magazine.
Magazines are low-growth in this day and age largely due to the fact that
people like to go online for any information they need or want. Many do not
want to pay for information that they can get online for free. The Magazine is also low-share because
in terms of its market, there are not many that seek out information in
magazines anymore. While The Magazine
may generate enough money to stay afloat, it is likely not creating a large
amount of income for ESPN.
To wrap things
up, this idea of business portfolio analysis is important because it is
important to understand where a company’s strengths and weaknesses are. The BCG
growth-share matrix allows a company to identify where they are performing well
and where they are not. Identifying question marks and dogs shows a company
where they may need to focus their marketing efforts in order to make as many
of their businesses and products into stars and cash cows as possible.
Identifying stars and cash cows shows a company what they are doing correctly
and maybe sets a marketing model that should be followed again. If a company
does not understand its strengths, weaknesses, and potential, it does not
understand how it can move forward to efficiently operate in the future.
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