The resultant portfolio analysis can then be roughly divided into 4 quadrants, as shown on the chart to the right.
Each of the four quadrants suggests a different strategic approach. For example:
- Stars: continue to invest.
- Cash Cows: improve efficiencies.
- Question Marks: decide.
- Dogs: exit.
In addition, one could vary the size with which you plot each source of value to represent, say, profitability.
Critical success factors:
- How you define the scope of each market (for measuring market share and growth) is key to the placement of each source of value.
- Don't ignore cross synergies, for example, taking into consideration sources of value which may serve as loss leaders.
- Don't ignore cyclical effects.
- When considering the allocation of costs across sources of value, remember that all costs are variable in the long term. That is, don't think that you need to keep an unprofitable product, channel etc. going just because it is absorbing some of your "fixed" costs.