The BCG Matrix
What Is BCG Matrix ?
It is a product portfolio matrix created by the Boston Consulting Group to give a strategic outlook by the analyzing the present and future competitive forces, underpinning businesses to consider growth opportunities of their product portfolios and decide where to invest and divest their investments. It uses the market share and the market growth criteria to determine the attractiveness and balance of a business portfolio.
It is also known as Growth/Share Matrix and divides the matrix into 4 distinct categories :
1. Star (High Growth, High Market Share)
A star is a strategic business unit (SBU) with in the business portfolio which operates in a growing market controlling the highest market share. They generate the highest income (ROI) and ingest huge amount of resources to sustain. Mostly monopolies and the first-to-market products are labelled as stars.
Kinley, a Coca-Cola product, is a suitable example of ‘Stars’ as the mineral water industry is a growing segment due to the rising population on a global market platform.
2. Question Marks (High Growth, Low Market Share)
A question mark which is also called a ‘problem child’, operates in a high growth industry having products and services with great potential but with a low market share as the industry is huge. These are startups or new products with good commercial prospects but require strong capital backup to gain the market share.
A question mark example can the tablet from Philips, as the market is growing very fast but it would require a lot of investment to capture market share from strong competitors like Apple, Samsung and Lenovo.
3. Cash Cows (Low Growth, High Market Share)
Cash cows are the business units with in a portfolio that has high market share in a mature and slow-growing industry. They have reached the maturity stage of the product lifecycle and follow stability strategies as they can generate returns higher than the market growth rate. These products should be taken the most advantage and their returns should be invested in other business units and follow a retrenchment strategy when they lose their appeal.
4. Dogs (Low Growth, Low Market Share)
Dogs are those business units having low market share in a static or declining markets. They suffer from low market share due to poor quality of products, higher costs and ineffective markets. They shrink all the resources and exploit management time, energy with no results and is recommended for closure or divestment at this stage.
