BCG Growth-share Matrix - CEOpedia _ Management Online
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5/11/2016
BCG growthshare matrix CEOpedia | Management online
BCG growthshare matrix
From CEOpedia | Management online
The BCG GrowthShare Matrix (also known as BCG matrix, BCG analysis, or Boston Box) was developed by Bruce Henderson in
the early 1970s for Boston Consulting Group, world known management consulting company. The Boston Consulting Group
BCG growthshare matrix
matrix presents different business units or major product lines based on their relative market share and the growth rate of the
Primary topic
Strategic
market. The model is useful in brand marketing, strategic management and production management and business portfolio analysis.
management
Content of the BCG growth share matrix
Related topics
After using method of calculating the BCG matrix two main variables are placed along the axes (Fig. 1) :
Market growth Y axis
Market growth is represented by the vertical axis. The axis is divided into two segments: more and less than 10 percent growth per
year. A market growth above 10 percent is considered high Therefore, this variable symbolizes the attractiveness of the market.
Relative market share X axis
Methods and
techniques
Relative market share is represented by the horizontal axis. It is company's market share divided by the share of its biggest
competitor. Relative market share serves as a measure of the company's strength in the relevant market segment.
Company
situation
analysis
Strategic
portfolio
analysis
Market
advantage
ADL matrix
Hofer matrix
McKinsey
matrix
GE matrix
The limiting value is at 1: a value greater than 1 implies that a company has the largest market share and therefore is the market
leader. A relative market share of 0.1 means that the company's sales volume is only 10 percent of the leader's sales volume; a relative share of 10 means that the
company's strategic business unit (SBU) is the leader and has 10 times the sales of the nextstrongest competitor in that market. The highest value typically is defined
on the left, and the lowest on the right.
In portfolio matrix four types of products can be distinguished, depending on the placement of a productmarket
combination in one of the four quadrants:
Stars
These are products with a high market share in a strongly growing market. The cash resources used for and the cash
resources required by these products are both high and therefore in principle are in balance. After some time all
growth slows. This is the reason, why stars become finally Cash Cows if they keep their market share. If they will
not be able to hold the market share, they will become Dogs.
Cash Cow
These are products with a high market share in a market that is not growing very much. As a result of the strong
market position, they produce many cash resources, and they require few investments because of the limited market
growth.
Fig. 1. BCG growthshare matrix
Question Marks
These products (also called Problem Children or Wild Cats) have a small market share in a rapidly growing market. As the name indicates, they have unsure and
questionable situation and can create problems: they produce little but require a lot of cash resources. If they are able to strengthen their position, they can become stars
and over time, when market growth decreases, cash cows.
Dogs
These are products with a low market share in a market that is growing very little. Therefore, they produce little but also require few investments. That means that the
cash resources used for and the cash resources required by these products are both low and for that reason are in balance. Dogs are worthless cash traps, they do not
bring sufficient profits for a company.
Strategic recommendations based on product portfolio matrix
Based on the BCG analysis and above described product market matrix, company has to decide what objective, strategy, and budget should be assigned to each SBU.
Several general investment strategies may be recommended.
Growth (Build) strategy
For some Question Marks a company may use a growth strategy financed by Cash Cows
The part of the Cash Cows' revenues would strengthen the positions of Question Marks that have the potential to become Stars. In that case, a company increases its
market share substantially.
Maintain position (Hold) strategy
The strong positions of the Stars and the Cash Cows should be maintained.
Also, if the Dogs have a sound size, they may be an important part of a company's activities. In that case, a maintenance strategy appears also to be promising.
Harvest or milk strategy
The main aim of this strategy is to rise shortterm cash flow despite the longterm consequences. Harvesting implies a decision of getting out of a business by executing
a program of constant cost cutting. Companies use this strategy when they expect to reduce their cost at faster rate than potential fall in sales. This strategy is suitable
for weak Cash Cows, Question Marks and Dogs. The recommendation for the Dogs is to milk them and remove them from the market.
Liquidation (Terminate, Divest) strategy
If a company runs a weak business, it should consider weather to harvest or divest its business units. The decision of liquidation gives a company the opportunity to
reinvest its resources in a more prosperous business. This strategy is appropriate for the Dogs and the rest of the Question Marks, which are not financed by the Cash
Cows.
See also:
Method of calculating the BCG matrix
References
Alsem K.J., (2007), Strategic Marketing: An Applied Perspective, New York, N.Y.: McGrawHill
https://ceopedia.org/index.php/BCG_growthshare_matrix
1/2
5/11/2016
BCG growthshare matrix CEOpedia | Management online
Alsem K.J., (2007), Strategic Marketing: An Applied Perspective, New York, N.Y.: McGrawHill
Allan, G. B., & Hammond, J. S. (1975). A note on the Boston Consulting Group concept of competitive analysis and corporate strategy. Harvard Business
School Case Services.
Calandro Jr, J., & Lane, S. (2007). A new competitive analysis tool: the relative profitability and growth matrix
(http://www.researchgate.net/profile/Scott_Lane2/publication/242339752_A_new_competitive_analysis_tool_the_relative_profitability_and_growth_matrix/links/00463533b02c5defaf000000.pdf),
Strategy & Leadership, 35(2), pp. 3038
Day, G. S. (1977). iagnosing the product portfolio (http://www.jstor.org/stable/1250631). The Journal of Marketing, 2938.
Hambrick, D. C., MacMillan, I. C., & Day, D. L. (1982). Strategic Attributes and Performance in the BCG Matrix—A PIMSBased Analysis of Industrial
Product Businesses (http://www.jstor.org/stable/256077). Academy of Management Journal, 25(3), 510531.
Ioana, A., Mirea, V., & Bălescu, C. (2009), Analysis of service quality management in the materials industry using the bcg matrix method
(http://www.amfiteatrueconomic.ro/temp/article_866.pdf). Amfiteatru Economic Review, 11(26), pp. 270276
Kotler P., (2000), Marketing Management, Prentice Hall, Millennium Edition
Koch, S., & Stix, V. (2008, July). Open Source Project Categorization Based on Growth Rate Analysis and Portfolio Planning Methods
(http://flosshub.org/system/files/Open%20Source%20Project%20Categorization.pdf), In OSS, pp. 375380
Stern, C. W., & Deimler, M. S. (Eds.). (2012). The Boston consulting group on strategy: Classic concepts and new perspectives. John Wiley & Sons
Boston Consulting Group (https://www.bcg.com/) website.
Author: Ewa Szczepankiewicz
Retrieved from "https://ceopedia.org/index.php?title=BCG_growthshare_matrix&oldid=7366"
Category: Strategic management methods
This page was last modified on 19 April 2016, at 09:24.
Content is available under GNU FDL 1.3 or newer unless otherwise noted.
https://ceopedia.org/index.php/BCG_growthshare_matrix
2/2
BCG growthshare matrix CEOpedia | Management online
BCG growthshare matrix
From CEOpedia | Management online
The BCG GrowthShare Matrix (also known as BCG matrix, BCG analysis, or Boston Box) was developed by Bruce Henderson in
the early 1970s for Boston Consulting Group, world known management consulting company. The Boston Consulting Group
BCG growthshare matrix
matrix presents different business units or major product lines based on their relative market share and the growth rate of the
Primary topic
Strategic
market. The model is useful in brand marketing, strategic management and production management and business portfolio analysis.
management
Content of the BCG growth share matrix
Related topics
After using method of calculating the BCG matrix two main variables are placed along the axes (Fig. 1) :
Market growth Y axis
Market growth is represented by the vertical axis. The axis is divided into two segments: more and less than 10 percent growth per
year. A market growth above 10 percent is considered high Therefore, this variable symbolizes the attractiveness of the market.
Relative market share X axis
Methods and
techniques
Relative market share is represented by the horizontal axis. It is company's market share divided by the share of its biggest
competitor. Relative market share serves as a measure of the company's strength in the relevant market segment.
Company
situation
analysis
Strategic
portfolio
analysis
Market
advantage
ADL matrix
Hofer matrix
McKinsey
matrix
GE matrix
The limiting value is at 1: a value greater than 1 implies that a company has the largest market share and therefore is the market
leader. A relative market share of 0.1 means that the company's sales volume is only 10 percent of the leader's sales volume; a relative share of 10 means that the
company's strategic business unit (SBU) is the leader and has 10 times the sales of the nextstrongest competitor in that market. The highest value typically is defined
on the left, and the lowest on the right.
In portfolio matrix four types of products can be distinguished, depending on the placement of a productmarket
combination in one of the four quadrants:
Stars
These are products with a high market share in a strongly growing market. The cash resources used for and the cash
resources required by these products are both high and therefore in principle are in balance. After some time all
growth slows. This is the reason, why stars become finally Cash Cows if they keep their market share. If they will
not be able to hold the market share, they will become Dogs.
Cash Cow
These are products with a high market share in a market that is not growing very much. As a result of the strong
market position, they produce many cash resources, and they require few investments because of the limited market
growth.
Fig. 1. BCG growthshare matrix
Question Marks
These products (also called Problem Children or Wild Cats) have a small market share in a rapidly growing market. As the name indicates, they have unsure and
questionable situation and can create problems: they produce little but require a lot of cash resources. If they are able to strengthen their position, they can become stars
and over time, when market growth decreases, cash cows.
Dogs
These are products with a low market share in a market that is growing very little. Therefore, they produce little but also require few investments. That means that the
cash resources used for and the cash resources required by these products are both low and for that reason are in balance. Dogs are worthless cash traps, they do not
bring sufficient profits for a company.
Strategic recommendations based on product portfolio matrix
Based on the BCG analysis and above described product market matrix, company has to decide what objective, strategy, and budget should be assigned to each SBU.
Several general investment strategies may be recommended.
Growth (Build) strategy
For some Question Marks a company may use a growth strategy financed by Cash Cows
The part of the Cash Cows' revenues would strengthen the positions of Question Marks that have the potential to become Stars. In that case, a company increases its
market share substantially.
Maintain position (Hold) strategy
The strong positions of the Stars and the Cash Cows should be maintained.
Also, if the Dogs have a sound size, they may be an important part of a company's activities. In that case, a maintenance strategy appears also to be promising.
Harvest or milk strategy
The main aim of this strategy is to rise shortterm cash flow despite the longterm consequences. Harvesting implies a decision of getting out of a business by executing
a program of constant cost cutting. Companies use this strategy when they expect to reduce their cost at faster rate than potential fall in sales. This strategy is suitable
for weak Cash Cows, Question Marks and Dogs. The recommendation for the Dogs is to milk them and remove them from the market.
Liquidation (Terminate, Divest) strategy
If a company runs a weak business, it should consider weather to harvest or divest its business units. The decision of liquidation gives a company the opportunity to
reinvest its resources in a more prosperous business. This strategy is appropriate for the Dogs and the rest of the Question Marks, which are not financed by the Cash
Cows.
See also:
Method of calculating the BCG matrix
References
Alsem K.J., (2007), Strategic Marketing: An Applied Perspective, New York, N.Y.: McGrawHill
https://ceopedia.org/index.php/BCG_growthshare_matrix
1/2
5/11/2016
BCG growthshare matrix CEOpedia | Management online
Alsem K.J., (2007), Strategic Marketing: An Applied Perspective, New York, N.Y.: McGrawHill
Allan, G. B., & Hammond, J. S. (1975). A note on the Boston Consulting Group concept of competitive analysis and corporate strategy. Harvard Business
School Case Services.
Calandro Jr, J., & Lane, S. (2007). A new competitive analysis tool: the relative profitability and growth matrix
(http://www.researchgate.net/profile/Scott_Lane2/publication/242339752_A_new_competitive_analysis_tool_the_relative_profitability_and_growth_matrix/links/00463533b02c5defaf000000.pdf),
Strategy & Leadership, 35(2), pp. 3038
Day, G. S. (1977). iagnosing the product portfolio (http://www.jstor.org/stable/1250631). The Journal of Marketing, 2938.
Hambrick, D. C., MacMillan, I. C., & Day, D. L. (1982). Strategic Attributes and Performance in the BCG Matrix—A PIMSBased Analysis of Industrial
Product Businesses (http://www.jstor.org/stable/256077). Academy of Management Journal, 25(3), 510531.
Ioana, A., Mirea, V., & Bălescu, C. (2009), Analysis of service quality management in the materials industry using the bcg matrix method
(http://www.amfiteatrueconomic.ro/temp/article_866.pdf). Amfiteatru Economic Review, 11(26), pp. 270276
Kotler P., (2000), Marketing Management, Prentice Hall, Millennium Edition
Koch, S., & Stix, V. (2008, July). Open Source Project Categorization Based on Growth Rate Analysis and Portfolio Planning Methods
(http://flosshub.org/system/files/Open%20Source%20Project%20Categorization.pdf), In OSS, pp. 375380
Stern, C. W., & Deimler, M. S. (Eds.). (2012). The Boston consulting group on strategy: Classic concepts and new perspectives. John Wiley & Sons
Boston Consulting Group (https://www.bcg.com/) website.
Author: Ewa Szczepankiewicz
Retrieved from "https://ceopedia.org/index.php?title=BCG_growthshare_matrix&oldid=7366"
Category: Strategic management methods
This page was last modified on 19 April 2016, at 09:24.
Content is available under GNU FDL 1.3 or newer unless otherwise noted.
https://ceopedia.org/index.php/BCG_growthshare_matrix
2/2
