What Is PPM (Product Portfolio Management) Proposed by the Boston Consulting Group? A Detailed Explanation of How to Use It and Its Benefits

PPM (Product Portfolio Management) is a management strategy framework used to determine how companies should combine multiple businesses and products, and how to allocate management resources. This article explains the basic concepts of PPM analysis, how to use it, and the benefits and points to consider when applying it to strategy formulation. You will gain insights into how to review your company’s business portfolio and make the most of limited resources.

Understanding the Basics of PPM (Product Portfolio Management)

PPM stands for “Product Portfolio Management.” It is a management methodology proposed in the 1970s by the Boston Consulting Group, an American consulting firm.

Its main purpose is to help companies decide where to concentrate their limited management resources (people, goods, money, and information) across multiple businesses and products, and where to recover investments.

It is defined as a strategic decision-support tool that evaluates and categorizes each business using objective indicators to optimize the balance of growth and profitability across the entire enterprise.

The Four Quadrants That Make Up the PPM Analysis Framework

In PPM analysis, the vertical axis represents “market growth rate” and the horizontal axis represents “relative market share.” Businesses are classified into four quadrants using this framework.

These four positions are named “Star,” “Cash Cow,” “Problem Child,” and “Dog.”

This four-quadrant framework is useful for visualizing which stage of the product lifecycle each business is in.

By visually grasping the current state and future potential of each business, you can develop an optimal management resource allocation strategy.

Star: A Future Ace Business with High Growth and Market Share

The “Star” is a position for businesses and products with both high market growth rate and high relative market share, showing very promising future potential.

The market is expanding rapidly, and maintaining a high share within it generates significant cash flow.

However, because it is a growth market, competition is fierce, and aggressive investment is essential to maintain and expand market share. This means cash outflows are also large.

While heavy investment is required currently, as market growth slows in the future, these businesses are expected to transition into “Cash Cows” — the next core revenue drivers — making them the true star candidates for the company.

Cash Cow: A Core Business That Generates Stable Revenue

The “Cash Cow” is where businesses and products with low market growth rate but high relative market share are positioned.

Because the market has entered a mature phase, the threat of new entrants is low, and large-scale additional investments to maintain market share are not required.

As a result, these businesses can generate stable and substantial cash flow with minimal investment.

This position plays an important role in supporting the company’s revenue base.

Channeling the abundant funds generated here into investments in the high-potential “Stars” and the promising “Problem Children” is the key to creating a sustainable growth cycle for the entire company.

Problem Child: A Business in a Growth Market That Struggles to Expand Market Share

The “Problem Child” refers to businesses and products with a high market growth rate but low relative market share. The market itself is attractive and has future potential, yet the company has not established a strong share amid intense competition.

Escaping this position requires aggressive investment to expand market share. This calls for a critical management decision: either intensify investment to nurture it into a “Star,” or reduce investment and withdraw if future prospects look bleak.

Examples include newly launched businesses in growth markets. If successfully nurtured, they can yield significant returns; however, they also carry the risk of falling into the “Dog” category even after heavy investment.

Dog: A Withdrawal Candidate with Low Market Attractiveness and Low Market Share

The “Dog” is the category for businesses and products with both low market growth rate and low relative market share.

With little market growth expected and low competitiveness within it, profitability is poor and future growth in cash flow is difficult to anticipate.

The basic strategy in PPM analysis is to consider downsizing, selling, or withdrawing from these businesses.

This is done to redirect management resources toward the more promising “Stars” and “Problem Children.”

However, since some businesses may secure stable profits in specific niche markets or create synergies with other businesses, it is important to examine from multiple perspectives rather than mechanically deciding to withdraw.

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The Two Evaluation Axes Used in PPM Analysis

PPM analysis uses two axes to evaluate businesses: “market growth rate” and “relative market share.”

Market growth rate is an indicator that evaluates the “external environment” — the attractiveness and future potential of the market in which a business operates.

Relative market share, on the other hand, functions as an indicator that evaluates the “internal environment” — the company’s strength and profitability compared to competitors.

Using these two objective axes allows multiple businesses within a company to be objectively positioned and compared.

Market Growth Rate: An Indicator Showing the Speed of Market Expansion

Market growth rate is an indicator of how fast the overall market in which a business operates is expanding. It is placed on the vertical axis of the PPM analysis diagram. The higher this indicator, the more attractive the market and the greater the opportunities for business growth.

Generally, a market growth rate exceeding 10% annually tends to be considered “high,” and below that “low,” but this standard needs to be adjusted based on industry characteristics.

Market growth rate is calculated using market size trend data obtained from government statistics and private research firm reports. It serves as an important basis for estimating future cash requirements.

Relative Market Share: The Company’s Position Compared to Competitors

Relative market share indicates what proportion of a specific market a company’s products or services occupy, and is set on the horizontal axis in PPM analysis. This indicator is important for measuring the company’s competitiveness and profitability in the market.

PPM analysis commonly uses “relative market share” compared to the top competitor in the industry, rather than simple market share.

It is calculated by dividing the company’s relative market share by that of the top competitor. A value greater than 1 indicates an industry leader; less than 1 indicates a follower, enabling an objective understanding of the company’s relative strength.

A 4-Step Guide to Conducting PPM Analysis

Implementing PPM analysis in practice is broadly divided into four steps.

No special analysis tools are required — the process can be carried out based on market data and the company’s own sales data.

First, clearly define the scope of analysis and collect and calculate the necessary data. Next, create a portfolio diagram based on that data, and finally derive management strategies from the positioning of each business.

Through this series of processes, it becomes possible to make decisions grounded in objective evidence.

Step 1: Select the Businesses or Products to Be Analyzed

The first step in conducting PPM analysis is to clearly define the unit of businesses or products to be analyzed.

The level of granularity — whether the entire company, a specific division, a product category, or an individual product — should be set according to the purpose of the analysis.

For example, if considering the allocation of resources across the entire company, use the business division level; if reviewing the strategy for a specific product line, use the product level.

Proceeding with an ambiguous scope of analysis will cause inconsistencies in data collection and interpretation, reducing the accuracy of the analysis.

Defining at which level the portfolio will be evaluated from the outset is critically important for conducting an effective analysis.

Step 2: Research and Calculate the Market Growth Rate and Relative Market Share for Each Business

Next, calculate specific figures for “market growth rate” and “relative market share” for each selected business.

Calculating market growth rate requires market size data published by government agencies or research firms.

For example, if this year’s market size is ¥11 billion and last year’s was ¥10 billion, the market growth rate is 10%.

To calculate relative market share, first calculate the market share (company sales ÷ market size) for both your company and the top competitor.

For example, if the market size is ¥10 billion, your company’s sales are ¥2.5 billion, and the top competitor’s are ¥3.5 billion, your share is 25% and the top competitor’s is 35%. The relative market share calculated from these figures is approximately 0.7 (25 ÷ 35).

In this way, accurately calculating values based on objective data forms the foundation for a reliable analysis.

If your company’s share is 70% and the competitor’s is 35%, the relative share would be 2.0.

Step 3: Create a Portfolio Diagram Based on the Calculated Figures

Using the “market growth rate” and “relative market share” figures calculated in Step 2, create a portfolio diagram.

Typically, this is represented as a matrix diagram (scatter plot) with the vertical axis showing market growth rate and the horizontal axis showing relative market share.

Each business is plotted on the chart at the calculated coordinates.

Furthermore, it is common practice to visually represent the scale of each business by showing its sales or profit size through the area of the circle plotted.

This portfolio diagram becomes an important analytical resource for comparing the positions of multiple businesses at a glance. Using spreadsheet software, this diagram can be created relatively easily.

Step 4: Understand the Positioning of Each Business from the Diagram and Formulate Strategy

Once the portfolio diagram is complete, the final step is to analyze which quadrant each business falls into and formulate future strategies.

For example, the basic strategy is to heavily invest cash generated by “Cash Cows” into “Stars” with expected growth and “Problem Children” with future potential.

On the other hand, for businesses classified as “Dogs,” consider downsizing or withdrawal to redirect resources elsewhere.

By viewing the diagram from a bird’s-eye perspective, you can evaluate the overall balance of the portfolio (e.g., whether there are enough “Cash Cows,” or whether there are too many “Problem Children”) and formulate an optimal investment strategy for the sustainable growth of the entire company.

Three Benefits of Introducing PPM Analysis

Incorporating PPM analysis into management can bring many benefits.

For companies operating multiple businesses, deciding which businesses to allocate limited management resources to is always a critical challenge.

PPM analysis evaluates the current state and future potential of each business based on objective data. By visualizing the overall portfolio, it supports strategic decision-making aligned with economic rationality, contributing to the company’s sustainable growth and improved profitability.

It Becomes Easier to Decide Which Businesses to Focus Management Resources On

The greatest benefit of introducing PPM analysis lies in optimizing the allocation of management resources.

The resources a company possesses — people, goods, money, and information — are finite, and distributing them equally across all businesses is inefficient.

By classifying each business into the four quadrants of “Star,” “Cash Cow,” “Problem Child,” and “Dog” through PPM analysis, it becomes clear which businesses to concentrate investment in, which to recover funds from, and which to withdraw from.

This enables data-driven, logical resource allocation decisions rather than relying on intuition or past experience, improving the overall investment efficiency of the company.

The Current State and Future Potential of Multiple Businesses Can Be Visualized at a Glance

When a company operates businesses across multiple sectors, it can be difficult to grasp the overall picture even if the situation of each individual business is understood.

PPM analysis evaluates all businesses using two unified axes — “market growth rate” and “relative market share” — and plots them on a single diagram.

This allows the current state and future potential of a complex business portfolio to be visualized at a glance.

From executives to business managers, all stakeholders can share a common understanding of the overall balance and the positioning of individual businesses, promoting rapid and accurate strategic discussions.

It Supports Evidence-Based Decision-Making Grounded in Objective Data

Management decisions can sometimes be influenced by subjective factors such as personal attachment to a particular business or past success experiences.

PPM analysis is a framework developed by the Boston Consulting Group that evaluates businesses based on objective data such as market growth rate and relative market share.

Using this method creates a foundation for more calm and logical discussions, free from subjectivity.

By using data as a common language, the rationale behind decisions — such as why to invest in a certain business or why to withdraw — can be clearly articulated, making it easier to fulfill accountability obligations to both internal and external stakeholders.

Important Points to Know When Using PPM Analysis

PPM analysis is a highly effective tool for reviewing the allocation of management resources, but it is not all-powerful.

Taking the results of the analysis at face value without understanding the limitations and issues of this framework can lead to incorrect management decisions.

To use PPM analysis more effectively, it is essential to correctly recognize its characteristics and make comprehensive judgments by combining results with other information.

Here we explain the key points to be particularly aware of when conducting the analysis.

Synergies Between Businesses Are Not Included in the Evaluation

One major caveat of PPM analysis is that, because it evaluates each business independently, synergies between businesses are not taken into account.

For example, even if a business is classified as a “Dog” in PPM terms, that business’s technology or brand image may be supporting the company’s core businesses, such as “Stars” or “Cash Cows.”

There are also cases where multiple businesses share sales channels or production facilities, generating cost-reduction effects.

Simply deciding to withdraw from a business based solely on PPM evaluation risks losing these synergies, potentially damaging the overall competitiveness of the company.

It Is Difficult to Accurately Evaluate the Future Potential of New Markets or Niche Businesses

Because PPM analysis is based on existing market data, it is difficult to accurately evaluate the future potential of innovative new businesses where the market has not yet fully formed, or niche businesses that have a small market size but strong support from a specific customer segment.

These businesses tend to have their market growth rate and relative market share underestimated in the analysis, making them more likely to be classified as “Problem Children” or “Dogs.” However, they may have the potential to achieve rapid growth in the future.

Rather than relying solely on analytical precision, it is necessary to also incorporate qualitative information and a long-term perspective to identify the latent value a business holds.

Analysis Is a Static Snapshot and Regular Reviews Are Essential

PPM analysis is merely a snapshot of the business portfolio at a single point in time.

The market environment, technological innovation, competitors’ strategies, and consumer needs are constantly changing, and the position of each business shifts accordingly.

For example, analysis results from 2025 may not necessarily remain valid years later.

A “Problem Child” may grow into a “Star,” or a “Cash Cow” may fall into the “Dog” category due to technological obsolescence.

Therefore, rather than conducting the analysis once and considering it done, it is essential to regularly update the data, review the analysis, and flexibly revise strategies in response to environmental changes.

What Is PPMS (Product Portfolio Management System), Related to PPM?

A term similar to PPM is PPMS, but there is a clear difference in meaning between the two.

While PPM (Product Portfolio Management) refers to the “management strategy framework” or “concept” itself for analyzing a business portfolio and deciding how to allocate management resources, PPMS (Product Portfolio Management System) refers to the “information systems” or “software tools” introduced to efficiently and continuously execute that PPM analysis.

By leveraging PPMS, companies can centrally manage data across multiple businesses, easily conduct analyses and simulations, and achieve more sophisticated and rapid portfolio management.

Frameworks That Are Effective When Used Together with PPM Analysis

While PPM analysis excels at gaining a broad view of the business portfolio, it can sometimes lack the information needed to translate insights into specific strategies.
To compensate for the weaknesses of PPM analysis and make more multifaceted, high-precision decisions, it is effective to combine it with other analytical methods.

In particular, combining frameworks that analyze internal and external business environments from multiple angles makes it easier to identify the key success factors (Key Success Factors) for each business and connect them to concrete action plans.

Here we introduce two representative complementary methods.

SWOT Analysis: Organizing a Business’s Strengths, Weaknesses, Opportunities, and Threats

SWOT analysis is a framework that organizes the current situation from four perspectives: the internal environment of “Strengths” and “Weaknesses,” and the external environment of “Opportunities” and “Threats.”

Whereas PPM analysis evaluates businesses using two quantitative axes, SWOT analysis allows for a broader range of qualitative factors to be identified.

For example, by conducting a SWOT analysis on a business classified as a “Problem Child” in PPM analysis, you may discover that business’s unique technology (strength) or new market needs (opportunity).

This helps reinforce the basis for deciding whether to continue investing and provides useful input for formulating a nurturing strategy.

3C Analysis: Exploring Success Factors from Three Perspectives — Customer, Competitor, and Company

3C analysis is a framework for analyzing the business environment from three “C” perspectives — “Customer/Market,” “Competitor,” and “Company” — to derive key success factors (Key Success Factors).

After grasping the broad positioning of each business through PPM analysis, using 3C analysis enables more micro-level strategy formulation.

For example, to further expand the market share of a “Star” business, it is necessary to specifically analyze what customers are seeking, what strategies competitors are taking, and how to leverage the company’s own resources.

This allows for a clearer direction in marketing strategy and product development.

Frequently Asked Questions

What is the basic approach to investment strategy?

The basic approach is to heavily invest cash earned by “Cash Cows” into “Stars” with expected growth and “Problem Children” with future potential, nurturing them accordingly. On the other hand, it is standard practice to consider withdrawal or downsizing from “Dogs” and “Problem Children” with poor prospects, making effective use of resources.

Is it necessary to combine with other analysis methods?

Yes, combining with other methods is recommended to compensate for PPM’s weaknesses. For example, using SWOT analysis to identify qualitative strengths and opportunities, or using 3C analysis to delve into specific customer and competitor situations, enables more precise strategy formulation.

Summary

PPM analysis is an effective management strategy framework for determining where to concentrate limited management resources and where to recover investments when a company operates multiple businesses.

By visualizing the business portfolio using two axes — “market growth rate” and “relative market share” — it supports decision-making based on objective data.

However, limitations exist, such as synergies between businesses being excluded from evaluation and the difficulty of evaluating new markets.

Therefore, rather than treating PPM analysis results as absolute, combining them with other frameworks such as SWOT analysis and 3C analysis, and examining business strategies comprehensively from multiple perspectives, is important for guiding the company toward continuous growth.