In Calcutta Business School, during the course of Managerial Economics we were assigned to take up one case from Harvard Business Review and discuss on the topic. Each student came up with a number of managerial situations that not only taught us work place related inefficiencies but also ways to address them. The case that I worked, dealt with a problem faced by a dwindling cash cow.
Claire Maxwell was the CEO of Eagle electronics. Her business was majorly flourishing in peripheral division which was headed by William Jones. She had recently started a disruptive initiative under which her company would be an angel investor for startups, funding 80% of required investment to boost innovation and entrepreneurship.
The peripheral division contributed 80% of companies profit and had a huge market share. William Jones feared that his entire department’s profit was being majorly invested in the disruptive drive and his department was not getting the desired investment of 300 Million for next 3 years and continuous funding for subsequent years. His division was losing working staff and customer base as they didn’t have investment to explore newer technologies. Mr. Jones needed immediate assistance.
I believe, Miss. Maxwell should have taken immediate steps to revise her investment plan and focus on her company’s strength. Innovating and building on her strengths would help her company survive. Once they are able to gather enough funds to meet disruptive needs they may continue their approach. The startups must also be given tougher targets, which shall discourage funding to poor performing areas. This helps in cost saving and gradual increase in wise investment towards the struggling cash cow.
This case taught us the concept of cash cow by BCG or growth-share matrix. BCG matrix classifies a business portfolio into 4 categories depending on industry attractiveness or growth rate. It basically gives us an insight about the company through their product line. The peripheral division had high relative market share or cash generation but low market growth rate or cash usage. It needed desired investment to have higher cash usage too, thus taking the situation to the star quadrant.
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PGDM Batch 2019-2021