Cash Cow

What is it?

A “Cash Cow” is a business or segment that is very cash generative. It appears as a quadrant on the BCG growth/share matrix where a strong market position is combined with a low growth market. The theory is that limited investment is needed to sustain the dominant market position and, so cash can be generated here for investment in faster growing areas.

In practice, cash cows are the most valuable parts of your business and should be defended as a high priority. Too many businesses have milked their “cash cow” dry by depriving it of resource and investment, to the point where it loses its strong competititive position and is gone.

When is it useful?

An Example?

The printing division has been a cash cow for HP for the last 20 years. They have a dominant worldwide leadership position, but the segment is slow growth. This solid cash cow has provided the cash to invest in acquisitions in PCs and IT Services

How do you do the analysis?

Plot the BCG Matrix for your business. Can be by business unit, product or customer segment. Cashcows will be in the lower right quadrant – low growth, but high relative market share.

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