Cash cow: Difference between revisions
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[[File:IPod classic.png|thumb|48% of Apple's revenue for the first quarter of 2007 was made from iPod sales.<ref>[http://www.apple.com/pr/library/2007/01/17results.html Apple Reports First Quarter Results], ''[[Apple Inc.]]'', 2007-01-17. Retrieved on 2007-02-17.</ref>]] |
[[File:IPod classic.png|thumb|48% of Apple's revenue for the first quarter of 2007 was made from iPod sales.<ref>[http://www.apple.com/pr/library/2007/01/17results.html Apple Reports First Quarter Results], ''[[Apple Inc.]]'', 2007-01-17. Retrieved on 2007-02-17.</ref>]] |
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In business, a '''cash cow''' is a product or a business unit that generates unusually high [[profit margin]]s: so high that it is responsible for a large amount of a company's operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes. |
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A cash cow is business [[jargon]] for a business venture that generates a steady return of profits that far exceed the outlay of cash required to acquire or start it. Many businesses attempt to create or acquire such ventures, since they can be used to boost a company's overall income and to support less profitable endeavors. <ref>Investopedia (http://www.investopedia.com/terms/c/cashcow.asp)</ref> Since the business unit can maintain profits with little maintenance or investment, a cash cow can also be used to describe a profitable but complacent company or business unit. |
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A firm is said to be acting as a cash cow when its earnings per share (EPS) is equal to its dividends per share (DPS), or in other words, when a firm pays out 100% of its net free cash flow (FCF) to its shareholders as dividends at the end of each accounting term. This also implies that the firm is not investing in product improvements (distributing all earnings) and is essentially considering itself not in a growth market. This could be the case if a company sees the future of a product line as bleak as a result of some other technology taking away its market share. |
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Risks of a cash cow include complacency, with management ignoring the need for change as market forces erode value; and ongoing [[turf war]]s between the management in charge of the cash cow and other managers trying to garner support for other products. |
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==Origins== |
==Origins== |
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The term cash cow originates from the farm, where farmers would have a "milch cow" that was kept for its steady supply of milk. <ref>Merriam Webster (http://www.merriam-webster.com/dictionary/milch%20cow) </ref> Peter F. Drucker is credit for being the first to introduce the word to the world of business consulting in the 1960s with his book, [[The Frontiers of Management]] <ref>Drucker, Peter F. The Frontiers of Management. New York: Truman Talley, 1986.</ref> |
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The term is thought{{by who|date=August 2013}} to be of Indian origin, since cattle are sacred in [[India]].{{Dubious |Origins |reason=does not make sense for current use of phrase more likely to be modern term and un referenced |date=August 2013}} In particular, though bulls are mentioned throughout [[Vedic period|Vedic]] literature, the cow has a special place in [[Hinduism|Hindu]] tradition. Owing to her ability to provide milk, the cow is viewed as a gentle, giving mother, and in many respects the mother of human civilization itself. She is closely identified with [[Lakshmi]], the goddess of wealth, a most popular deity in the religion's vast pantheon. Interestingly, the creation story of Lakshmi details the goddess being born from an [[Samudra manthan|ocean of milk]]. Countless rural festivals dedicated to the earth goddess involve an [[aarti]] to cows to ensure a family's wealth or village's harvest. |
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However, one famous tale from the epic [[Ramayana]] illustrates a lucid depiction of the proverbial cash cow. A king named [[Vishvamitra]], who upon visiting the sage [[Vashista]], was captivated by the mendicant's cow. Named [[Kamadhenu]], the cow had the ability to instantly produce whatever a person wished for. Thinking that Kamadhenu was the most valuable asset any man could have, Vishvamitra waged war for the miraculous cow, only to slowly relinquish his crown after realizing that real human power lay in spiritual enlightenment.{{CN|date=August 2013}} |
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The term was probably introduced into English vernacular during the British occupation of India. |
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The word "cow" in modern English is a derivative and linguistic cognate of the [[Sanskrit]] "gau", "go", or "gai". |
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==Related meanings== |
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"Cash cow" is also used sarcastically by sales and business people to describe a customer or organization that has no control over its spending. Quite often the term is used to describe government departments like Foreign Aid, and Highways and Social Security, where the spending is out of proportion to the services or goods received. |
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Cash Cow relative meanings could relate to the mass confusion of the stocks that remarkably went up in 1989. There was no logical or mathematical answer to this problem. The dilemma was covered up by the government and simply ignored. The only thing that was found from this confusion was a date: 11/28/13. |
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"Cash cow" is used in a [[Growth-share matrix]] to represent one of the four quadrants in the BCG matrix. A "cash cow" product has high market share in a slow-growing market. A corporation would want to have as many "cash cow" products as possible. |
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"Cash cow" is a business with well-established brand names whose commonality and familiarity increases repeated buying of the products or services. <ref name="Barron's"> [Barron's Financial Guides, 1995],</ref> |
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==Signs of a cash cow== |
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{{Expand section|An explanation of how and why these are signs of a cash cow|date=March 2012}} |
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*Product variations |
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*Customer segmentation |
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*Pricing flexibility |
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*Cost reduction |
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*Targets specific competitors |
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* Cash Cow Marketing ltd |
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==References== |
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{{Reflist}} |
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[[Category:Management]] |
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[[Category:Strategic management]] |
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[[Category:Product management]] |
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Revision as of 19:01, 14 January 2014
 | This article possibly contains original research. (May 2010) |
 | This article needs additional citations for verification. (June 2007) |
A cash cow is business jargon for a business venture that generates a steady return of profits that far exceed the outlay of cash required to acquire or start it. Many businesses attempt to create or acquire such ventures, since they can be used to boost a company's overall income and to support less profitable endeavors. [2] Since the business unit can maintain profits with little maintenance or investment, a cash cow can also be used to describe a profitable but complacent company or business unit.
The BCG growth-share matrix developed by the Boston Consulting Group uses the term "cash cow" to describe business units experiencing high market share and operating in a mature industry.
Origins
The term cash cow originates from the farm, where farmers would have a "milch cow" that was kept for its steady supply of milk. [3] Peter F. Drucker is credit for being the first to introduce the word to the world of business consulting in the 1960s with his book, The Frontiers of Management [4]
- ^ Apple Reports First Quarter Results, Apple Inc., 2007-01-17. Retrieved on 2007-02-17.
- ^ Investopedia (http://www.investopedia.com/terms/c/cashcow.asp)
- ^ Merriam Webster (http://www.merriam-webster.com/dictionary/milch%20cow)
- ^ Drucker, Peter F. The Frontiers of Management. New York: Truman Talley, 1986.