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BCGgrowthsharematrixCEOpedia|Managementonline

BCGgrowthsharematrix
FromCEOpedia|Managementonline
TheBCGGrowthShareMatrix(alsoknownasBCGmatrix,BCGanalysis,orBostonBox)wasdevelopedbyBruceHendersonin
theearly1970sforBostonConsultingGroup,worldknownmanagementconsultingcompany.TheBostonConsultingGroup
BCGgrowthsharematrix
matrixpresentsdifferentbusinessunitsormajorproductlinesbasedontheirrelativemarketshareandthegrowthrateofthe
Primarytopic
Strategic
market.Themodelisusefulinbrandmarketing,strategicmanagementandproductionmanagementandbusinessportfolioanalysis.
management

ContentoftheBCGgrowthsharematrix

Relatedtopics

AfterusingmethodofcalculatingtheBCGmatrixtwomainvariablesareplacedalongtheaxes(Fig.1):

MarketgrowthYaxis
Marketgrowthisrepresentedbytheverticalaxis.Theaxisisdividedintotwosegments:moreandlessthan10percentgrowthper
year.Amarketgrowthabove10percentisconsideredhighTherefore,thisvariablesymbolizestheattractivenessofthemarket.

RelativemarketshareXaxis

Methodsand
techniques

Relativemarketshareisrepresentedbythehorizontalaxis.Itiscompany'smarketsharedividedbytheshareofitsbiggest
competitor.Relativemarketshareservesasameasureofthecompany'sstrengthintherelevantmarketsegment.

Company
situation
analysis
Strategic
portfolio
analysis
Market
advantage
ADLmatrix
Hofermatrix
McKinsey
matrix
GEmatrix

Thelimitingvalueisat1:avaluegreaterthan1impliesthatacompanyhasthelargestmarketshareandthereforeisthemarket
leader.Arelativemarketshareof0.1meansthatthecompany'ssalesvolumeisonly10percentoftheleader'ssalesvolumearelativeshareof10meansthatthe
company'sstrategicbusinessunit(SBU)istheleaderandhas10timesthesalesofthenextstrongestcompetitorinthatmarket.Thehighestvaluetypicallyisdefined
ontheleft,andthelowestontheright.
Inportfoliomatrixfourtypesofproductscanbedistinguished,dependingontheplacementofaproductmarket
combinationinoneofthefourquadrants:

Stars
Theseareproductswithahighmarketshareinastronglygrowingmarket.Thecashresourcesusedforandthecash
resourcesrequiredbytheseproductsarebothhighandthereforeinprincipleareinbalance.Aftersometimeall
growthslows.Thisisthereason,whystarsbecomefinallyCashCowsiftheykeeptheirmarketshare.Iftheywill
notbeabletoholdthemarketshare,theywillbecomeDogs.

CashCow
Theseareproductswithahighmarketshareinamarketthatisnotgrowingverymuch.Asaresultofthestrong
marketposition,theyproducemanycashresources,andtheyrequirefewinvestmentsbecauseofthelimitedmarket
growth.

Fig.1.BCGgrowthsharematrix

QuestionMarks
Theseproducts(alsocalledProblemChildrenorWildCats)haveasmallmarketshareinarapidlygrowingmarket.Asthenameindicates,theyhaveunsureand
questionablesituationandcancreateproblems:theyproducelittlebutrequirealotofcashresources.Iftheyareabletostrengthentheirposition,theycanbecomestars
andovertime,whenmarketgrowthdecreases,cashcows.

Dogs
Theseareproductswithalowmarketshareinamarketthatisgrowingverylittle.Therefore,theyproducelittlebutalsorequirefewinvestments.Thatmeansthatthe
cashresourcesusedforandthecashresourcesrequiredbytheseproductsarebothlowandforthatreasonareinbalance.Dogsareworthlesscashtraps,theydonot
bringsufficientprofitsforacompany.

Strategicrecommendationsbasedonproductportfoliomatrix
BasedontheBCGanalysisandabovedescribedproductmarketmatrix,companyhastodecidewhatobjective,strategy,andbudgetshouldbeassignedtoeachSBU.
Severalgeneralinvestmentstrategiesmayberecommended.

Growth(Build)strategy
ForsomeQuestionMarksacompanymayuseagrowthstrategyfinancedbyCashCows
ThepartoftheCashCows'revenueswouldstrengthenthepositionsofQuestionMarksthathavethepotentialtobecomeStars.Inthatcase,acompanyincreasesits
marketsharesubstantially.

Maintainposition(Hold)strategy
ThestrongpositionsoftheStarsandtheCashCowsshouldbemaintained.
Also,iftheDogshaveasoundsize,theymaybeanimportantpartofacompany'sactivities.Inthatcase,amaintenancestrategyappearsalsotobepromising.

Harvestormilkstrategy

Themainaimofthisstrategyistoriseshorttermcashflowdespitethelongtermconsequences.Harvestingimpliesadecisionofgettingoutofabusinessbyexecuting
aprogramofconstantcostcutting.Companiesusethisstrategywhentheyexpecttoreducetheircostatfasterratethanpotentialfallinsales.Thisstrategyissuitable
forweakCashCows,QuestionMarksandDogs.TherecommendationfortheDogsistomilkthemandremovethemfromthemarket.

Liquidation(Terminate,Divest)strategy
Ifacompanyrunsaweakbusiness,itshouldconsiderweathertoharvestordivestitsbusinessunits.Thedecisionofliquidationgivesacompanytheopportunityto
reinvestitsresourcesinamoreprosperousbusiness.ThisstrategyisappropriatefortheDogsandtherestoftheQuestionMarks,whicharenotfinancedbytheCash
Cows.
Seealso:
MethodofcalculatingtheBCGmatrix

References
AlsemK.J.,(2007),StrategicMarketing:AnAppliedPerspective,NewYork,N.Y.:McGrawHill

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BCGgrowthsharematrixCEOpedia|Managementonline

AlsemK.J.,(2007),StrategicMarketing:AnAppliedPerspective,NewYork,N.Y.:McGrawHill
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Ioana,A.,Mirea,V.,&Blescu,C.(2009),Analysisofservicequalitymanagementinthematerialsindustryusingthebcgmatrixmethod
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KotlerP.,(2000),MarketingManagement,PrenticeHall,MillenniumEdition
Koch,S.,&Stix,V.(2008,July).OpenSourceProjectCategorizationBasedonGrowthRateAnalysisandPortfolioPlanningMethods
(http://flosshub.org/system/files/Open%20Source%20Project%20Categorization.pdf),InOSS,pp.375380
Stern,C.W.,&Deimler,M.S.(Eds.).(2012).TheBostonconsultinggrouponstrategy:Classicconceptsandnewperspectives.JohnWiley&Sons
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Author:EwaSzczepankiewicz
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