Wednesday, December 4, 2013

Investment Risk Management - BCG Framework

Investment Risk Management Using BCG Matrix

By Teja Setty (Andrew Id: VTS)

Risk management and intelligent investment decisions determines the success of most companies. One of the most popular frameworks to make investment decisions by large corporations is the BCG matrix. The framework details how a company should position itself to ensure long term longevity and also growth.

Also based on my experience during the simulation, it is a great strategy to ensure that you make sure that you are competitive in the market with your Cash cows which provide you with continuous revenues which are essential for all other types of projects. 

Any products which have the potential to give you a large market share and require high investment should be carefully evaluated and most such opportunities should be pursued to try and create the next cash cow.

The question marks are projects that require high investment and give low market share and should only be taken up if  they have a great potential uses.

Low cash generation and low growth projects should be liquidated. 

The primary lesson to be learned is that not all projects are the same and will generate the same profits, and that carefully choosing and investing in them will decide the future of the company.

Would it be fair to say that with the Cash cows and and dogs we are operating in the red ocean space, and with the stars we are trying to create a blue ocean for the organization?

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