- Cash Cow Definition
- Meaning of Cash Cow
- Examples of Cash Cow Products
Cash Cow Definition
A Cash Cow is a profitable venture or business that has acquired most of the mainstream market share with little speculation at the start of it. The term also refers to one out of four essential aspirants of a planning tool, a portfolio management framework, first introduced in the early 1970s by BCG, a management consultancy based in Boston. It is also known as BCG Matrix.
This term is popular in the business community for a business venture or product that consistently generates high revenue for the business. Many businesses wish to acquire such a venture by owning some stake in it so that the Cash Cow Company can support their other business units that are not earning well and need cash to survive in the market.
Meaning of Cash Cow
The term is a metaphor for a constant income source or steady revenue-generating company. Business owners willingly want to buy such companies so that they can generate the most value returns from their other ventures. Investors or shareholders finance their not-performing ventures with the help of the money earned from the Cash Cow Company. It can also be used for research and development, to reduce the overall debt burden on the company, to pay dividends, or to buy back shares.
A company does not have to invest much in the business apart from the initial investment, and once the company recovers its initial outlay, it does not require more money to keep the business going.
Examples of Cash Cow Products
A Cash Cow Company offers steady growth to its shareholders with a low maintenance cost. The iPhone is the best example of a Cash Cow Product. It offers great support to Apple Inc, located in California. Another notable example of a cash cow is Alphabet’s (Google) search engine, and Kleenex tissues. All these products have a large market share in a slow growth-rate industry and as a result, these products require little investment while generating a constant income source.