Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
  1. Dashboard 1
  2. Consulting Q&A 2
  3. Why is the cash-flow of "stars" (BCG-matrix) neutral? 3
expert
Expert with best answer

Sidi

99% Recommendation Rate

427 Meetings

4,214 Q&A Upvotes

USD 449 / Coaching

Book a coaching
View profile of Sidi
1

Why is the cash-flow of "stars" (BCG-matrix) neutral?

BCG Matrix growth matrix

In one of the here shown matrices, the cash-flow of stars is said to be neutral. I am wondering why. It is solely because of the amount of investment since the market share and growth are big. Correct?

In one of the here shown matrices, the cash-flow of stars is said to be neutral. I am wondering why. It is solely because of the amount of investment since the market share and growth are big. Correct?

 Recent activity on Jan 16, 2019
1.6 k Views
1 answer
  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Sidi

99% Recommendation Rate

427 Meetings

4,214 Q&A Upvotes

USD 449 / Coaching

Choose a time slot
View profile of Sidi

Hi! This is just an approximation and not an exact science. The cash flow is seen as a result of earnings power and rational investment strategy for each of the quadrants. For Cash Cows and Stars the rationale is as follows:

  • Cash Cows: Strong relative market share in a mature low growth market --> low investment (outflows) and high earnings (inflows) --> high positive cash flow
  • Stars: Strong relative market share in a growing market --> high investment (outflows) and high earnings (inflows) --> neutral cash flow (since earnings and investments cancel each other out)

Hope this helps!

Cheers, Sidi

Hi! This is just an approximation and not an exact science. The cash flow is seen as a result of earnings power and rational investment strategy for each of the quadrants. For Cash Cows and Stars the rationale is as follows:

  • Cash Cows: Strong relative market share in a mature low growth market --> low investment (outflows) and high earnings (inflows) --> high positive cash flow
  • Stars: Strong relative market share in a growing market --> high investment (outflows) and high earnings (inflows) --> neutral cash flow (since earnings and investments cancel each other out)

Hope this helps!

Cheers, Sidi

5 Book a coaching with Sidi

Hi Sidi, thanks, that was what I thought but I wanted to double check! Thank you! — B on Jan 16, 2019

Similar questions

MECE framework to grow in sales
Can I use the BCG matrix in case interviews with other consultancy companies?
Ask new question