A method of classifying businesses or products into four groups (stars, cash cows, question marks and dogs) along two axes, market growth rate and relative market share, to decide how to allocate management resources. It was proposed by Boston Consulting Group.
Japanese name: プロダクトポートフォリオマネジメント(PPM)
Product portfolio management (PPM) appears in 3 practice questions across 1 topic, including Business Strategy and Accounting Basics.
With market growth rate on the vertical axis and relative market share (the company's share divided by that of its largest competitor) on the horizontal axis, businesses are classified into four groups. Stars are high on both, cash cows have low growth and high share, question marks (problem children) have high growth and low share, and dogs are low on both. Market growth rate is taken to indicate how much investment is needed, and relative market share to indicate low costs through the experience curve and the amount of cash generated.
The basic idea of PPM is to direct the cash generated by cash cows into expanding the share of question marks and maintaining the share of stars. A question mark becomes a star if investment succeeds in raising its share, or a dog if it fails. A star becomes a cash cow and starts generating cash when market growth slows. For dogs, reduction, withdrawal or sale is often considered.
PPM shows the whole set of businesses in a single chart, but the classification changes depending on how the market is defined, and it cannot show relationships such as shared technology or customers between businesses. In some industries, the assumption that a high share means low costs and strong cash generation does not hold. In industries such as semiconductors, where market growth swings widely from year to year, decisions are made in light of long-term trends, not just the classification at one point in time.
Answer: A. Star
PPM classifies businesses or products into four groups along two axes, market growth rate and relative market share, to decide how to allocate management resources. A star, with both high market growth and high relative market share, has large sales but also needs heavy investment to keep its share in a growing market, so both its cash inflow and outflow are large. Low market growth with high share is a cash cow, high market growth with low share is a question mark (problem child), and low on both is a dog.
Answer: B. Because market growth is slow, it needs little investment, and because its share is high, it generates a lot of cash, which is directed to question marks and stars
A cash cow is a business with a low market growth rate and a high relative market share. Because the market is mature, little investment is needed in added capacity or promotion, and because its share is high, its costs are also low thanks to economies of scale and the experience curve, so it generates a lot of cash. In PPM, this cash is invested to expand the share of question marks with growth potential and to maintain the share of stars, so that the company renews its portfolio of businesses as a whole.
No. In business strategy, PPM stands for product portfolio management. The ppm used for semiconductor quality and impurity concentrations is the unit "parts per million", and defect rates are sometimes expressed in DPPM (defective parts per million).
Not necessarily. If the business shares technology or customers with other businesses, or makes a steady profit, it may be continued. The PPM classification is a starting point for deciding how much resource to allocate to each business, and withdrawal decisions also take into account profit, cash flow and the relationships between businesses.
PPM classifies businesses or products into four groups along two axes, market growth rate and relative market share, to decide how to allocate management resources.
In product portfolio management (PPM), how is a business wi…In PPM, this cash is invested to expand the share of question marks with growth potential and to maintain the share of stars, so that the company renews its portfolio of businesses as a whole.
Which correctly describes a "cash cow" business in PPM?The fact that companies that gain a large share early and build up cumulative production find it easier to cut costs also underlies the ideas of PPM and the cost leadership strategy.
The manufacturing cost of a product follows an experience c…As an Amazon Associate I earn from qualifying purchases.
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