Direction of Arrows in the BCG Matrix




Strategic Portfolio Management
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8
Trishit Chatterjee, US

Direction of Arrows in the BCG Matrix

I wonder if the direction of the arrow between Cash Cow and Star isn't incorrect?
I think the Cash Cow (with excess dollars) should fund the star which is cash hungry (high working capital needs). So I think the arrow should flow from the cash cow to the star.
 

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6
Jaap de Jonge
Editor, Netherlands
 

Direction of Arrows is OK

The arrows are not indicating cash flows, but they represent the direction in which the company should try to move each product.
If you would like to add arrows to indicate cash flows, then there would be an arrow:
- from cash cow to star
- from cash cow to question mark
- from dog to star
- from dog to question mark.

 
2
R.C. Natarajan
Professor of Marketing, India
 

The Arrows Shown in the BCG Diagram

The arrows show how normally an SBU navigates over time. Normally, in a competitive scenario, a new sbu starts as a "?", fights and becomes a leader and hence a "star". With the plc, the market growth rate falls with saturation and hence the SBU moves to "cash cow". These arrows do not pertain to the funding direction, please note. If we talk about funding direction, your suggestions are perfectly correct.

   

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