The BCG Matrix or growth-share matrix is a chart that had been created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis.
High growth, High market share
- Stars are leaders in business.
- They also require heavy investment, to maintain its large market share.
- It leads to large amount of cash consumption and cash generation.
- Attempts should be made to hold the market share otherwise the star will become a CASH COW.
- Integration strategies, intensive strategies, joint ventures
Low growth , High market share
- They are foundation of the company and often the stars of yesterday.
- They generate more cash than required.
- They extract the profits by investing as little cash as possible
- They are located in an industry that is mature, not growing or declining.
- Product development, concentric diversification
If weakens—retrenchment or divestiture
Low growth, Low market share
- Dogs are the cash traps.
- Dogs do not have potential to bring in much cash.
- Number of dogs in the company should be minimized.
- Business is situated at a declining stage.
- Liquidation, divestiture, retrenchment
High growth, Low market share
- Most businesses start of as question marks.
- They will absorb great amounts of cash if the market share remains unchanged, (low).
- Why question marks?
- Question marks have potential to become star and eventually cash cow but can also become a dog.
- Investments should be high for question marks.
- Decision to strengthen (intensive strategies) or divest
BENEFITS of BCG MATRIX
- BCG MATRIX is simple and easy to understand.
- It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.
- It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.