PPM is abbreviation of Products Portfolio Management, which is a framework to consider business portfolio proposed by BCG.
PPM has the matrix having four areas divided by market growth rate and
market share as follows.
PPM is proposed based on scale economics so it is difficult to use in industries which scale economics cannot be applied to. In addition, in PPM, vertical line is considered based on PLC, Product Life Cycle, and horizontal line is considered based on experience curve.
The company can expect to earn big profit from Stars but cannot expect
to earn cash flow because Stars needs huge investment cost to catch up
market growth. The company will have to maintain the market share of Stars,
continue to invest in it and finally have it move Cash Cows. If a business
is Question Marks, the company will have to consider having it move Star
The company can expect to earn huge cash flow from Cash Cows but it should
save investment cost for Cash Cows because it cannot expect to expand Cash
Cows business. While the company has Cash Cows, it needs to move another
business to Star by investment.
The company should make a decision on moving Question Marks to Stars by
investment or exiting it to avoid moving it to Dogs.
The company needs to shut down or sell Dogs. However, it sometimes cannot
do because of;
- Past huge investment
- Opposition of customers, suppliers, dealers and employees including labor
- Huge quitting cost
- Keeping reputation and pride of management
An example of PPM
The following graph is an example of PPM. The size of circle shows revenue
of each business.
The following two graphs shows how first business and late business move