Dog

DEFINITION of 'Dog'

One of the four categories or quadrants of the BCG Growth-Share matrix developed by Boston Consulting Group in the 1970s to manage different business units within a company. A Dog is a business unit that has a small market share in a mature industry. It therefore neither generates the strong cash flow nor requires the hefty investment that a Cash Cow or Star unit would (two other categories in the BCG matrix). The term Dog may also refer to a stock that is a chronic underperformer and hence a drag on the performance of a portfolio.

BREAKING DOWN 'Dog'

Since a Dog ties up valuable capital and resources that can be more effectively deployed elsewhere in the company, it is a logical candidate for sale or divestment. However, a Dog may sometimes have a broader role to play within a company; for instance, it may offer products that complement those offered by other business units in the company, or it may be a portal that gets customers interested in the company’s other products. In such cases, management would have to decide whether the synergies and intangible gains offered by this business unit justify the capital tied up in it.

In the majority of cases, since a Dog typically operates in a mature industry, management would not be justified in allocating more capital to it in a bid to expand market share. If the unit’s long-term prospects are bleak, the best course of action might be to sell or divest the business as soon as possible, since its deteriorating prospects would make it harder to sell with time.

In the business world, a Dog is very unlikely to ever return to its glory days as a Star or Cash Cow. In the world of investments, however, a stock that is a Dog one year can eventually become a Star, if management executes a turnaround that improves the stock’s profitability and prospects. This is the basic premise behind the “Dogs of the Dow” strategy, which buys the highest dividend yielders in the DJIA based on the notion that these stocks can outperform the index over time as they improve their operating performance and financial results.

RELATED TERMS
  1. BCG Growth Share Matrix

    A planning tool that uses graphical representations of a company’s ...
  2. Cash Cow

    1. One of the four categories (quadrants) in the BCG growth-share ...
  3. Star

    1. A type of candlestick formation that is identified when a ...
  4. Dog Eat Dog

    Intense competition in a market. Dog eat dog competition most ...
  5. Cats And Dogs

    A slang term referring to speculative stocks that have short ...
  6. Dogs Of The Dow

    An investing strategy that consists of buying the 10 DJIA stocks ...
Related Articles
  1. Trading

    Don't Dump On The Dogs

    Just because a stock is in a slump doesn't mean it's time to sell. Some value managers make a living by investing in "dogs."
  2. Managing Wealth

    Barking Up The Dogs Of The Dow Tree

    One well-known and successful strategy for cashing in on dividends is the Dogs of the Dow. Here's what you need to know about them.
  3. Markets

    Burger King's New Hot Dogs:Vertical Integration Genius

    Burger King is moving beyond burgers into hot dogs. Here is why this is a smart move.
  4. Markets

    What is a Complement?

    A good or service that’s used in conjunction with another good or service is a complement.
  5. Investing

    What's a Dog and Pony Show?

    A dog and pony show is a presentation that markets new securities as an initial public offering, or securities on a secondary basis.
  6. Entrepreneurship & Small Business

    One-Person Businesses You Can Start Quickly

    Here is a list of professions you can quickly enter with an average-sized to large investment.
  7. Trading

    How To Place A Trade With TradeStation Trading Software: Matrix

    The Matrix order-entry interface allows traders to view and trade an instrument from one window. The Matrix can be used to place orders by loading the appropriate symbol and using one of the ...
  8. Markets

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  9. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  10. ETFs & Mutual Funds

    SDOG vs. NOBL: Comparing Dividend-Oriented ETFs

    Read an overview and comparative analysis of two ETFs that employ different approaches to stock selection based on dividend yields.
RELATED FAQS
  1. How do companies with a large product portfolio use BCG Analysis?

    Understand what BCG analysis is, and learn how companies use the BCG Matrix to analyze the performance of their product portfolios. Read Answer >>
  2. Does renters insurance cover dog bites?

    Learn how a renters insurance policy can provide liability coverage for dog bites and how coverage may vary by state and ... Read Answer >>
  3. What is a "dog and pony" show?

    A dog and pony show, or a road show, is a term used to describe a seminar or forum that has the purpose of introducing new ... Read Answer >>
  4. What's more important, cash flow or profits?

    Learn about the different effects that cash flow and profit have on a business so you can decide which aspect to focus on. Read Answer >>
  5. Where exactly do dividends come from?

    Learn about sources of cash dividend, such as operational, financing and investing cash flows, as well as issuances of new ... Read Answer >>
  6. How much working capital does a small business need?

    Learn about the three primary factors that determine how much working capital is needed by a small business, including business ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center