You have been given the BCG matrix on two divisions of your company - the appliance and electronics divisions

The BCG matrix is very helpful for companies in making portfolio decision strategy. In this case, electronics division is in the question mark segment. Questions marks are low market share business units in high growth markets. Investment is needed to hold their share, building them into stars. Therefore, we can say that the electronics division of the company has a very small market share in a fast growing market.

Therefore, the company should try to initiate strategic and marketing plans to concentrate on this rapidly rising industry and try to capture more market share by new strategies and analyzing the reasons for poor performance till now. This division has the capability of becoming a star performer in the company's portfolio of products, therefore the management, marketing and other key departments should focus on improving the performance of this segment and should find out and correct all the factors which has resulted in such small market share in a fast growing business segment.

The appliance division is in the cash cow segment which means it is like a bread and butter for the company. Cash cow means these are low growth, high market share products. They require less investment to hold onto their market share, such as products from reputed companies like Johnson & Johnson, Proctor & Gamble, etc. Cash Cows support other SBU's because of their goodwill and market share.

A cash cow is so called because it produces a lot of cash for the company. The company does not have to finance a lot of expansion since the market's growth rate is low. And since the business is the market leader, it enjoys economies of scale and higher profit margins. The company uses its cash cow businesses to pay its bills and support the stars, question marks, and dogs, which tend to be cash hungry.

Therefore, in this case, the company should try to preserve the market share. If the appliance division continues to yield a large positive cash flow, this strategy is perfect. For weak cash cows whose future appears to be dim, the appropriate strategy is to harvest, which means to increase the SBU's short-term cash flow regardless of the long-term effect.

source: http://mktg-sun.wharton.upenn.edu/forecast/paperpdf/Portfolio%20Planning%20Exercise.pdf.

However, BCG is just one measure to identify the relative importance of various product lines in the whole portfolio of products and aids in better decision making. The company should use other measures/matrix also such as Porter's five forces analysis, perceptual mapping, etc. to confirm the outcome of BCG matrix and then decide on a strategic plan. It is not prudent for the company to frame all its strategic decisions on the basis of BCG matrix only.

One big advantage of the matrix is its ability to provide a comprehensive snapshot of the positions of a company's various business concerns. Furthermore, an important benefit of the BCG Matrix is that is draws attention to the cash flow, investment characteristics, and needs of an organization's business units, helping organizations to maintain a balanced portfolio.

Unfortunately, the BCG Matrix, like all analytical techniques, also has some important limitations. It has been criticized for being too simplistic in its use of growth rate and market share. Market growth rate is only one variable in market attractiveness and market share is only one variable in a business's competitive position. Furthermore, viewing every business as a star, cash flow, dog, or question mark is not always realistic. A four-cell matrix is too simple because strategic competitive positions are more complicated than "high" and "low".

Another disadvantage of using the BCG Matrix is that it is often difficult for a company to sufficiently divide its business units or product lines. Consequently, it is difficult to determine market share for the various units of concern.

Therefore, it is advantageous to use a wide variety of techniques to arrive at an appropriate corporate strategy.