Define the Boston Consulting Group Approach of SBU’s

Strategic Business Unit (SBU): A Strategic Business Unit (SBU) is a unit of the company that has a separate mission and objectives and that can be planned independently from other company business. For instance company division, a product line within a division or something a single product or brand.

The Boston Consulting Group Approach (BCG): Using the classical Boston Consulting Group (BCG) approach, a company classifies all its SBUs according to a growth-share matrix, as shown in the figure. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. The growth-share matrix defines four types of SBUs.

  • Stars: Stars are high-growth, high-share business or products. They often need heavy investments to finance their rapid growth. Eventually, their growth will slow down and they will turn into cash cows.
  • Cash Cows: Cash cows are growth, high-share business or products. These established and successful SBUs need less investment to hold their market share.Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment.
  • Question Marks: Question marks are low-share business units in high-growth They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out.
  • Dogs: Dogs are low-growth, low-share business and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash.