Boston Consulting Group (BCG) Matrix

One of the models used in product portfolio analysis is Boston Consulting Group (BCG) analysis. This is also referred to as Boston Matrix or BCG Matrix. This model was developed by Bruce Henderson for the Boston Consulting Group; it is a chart that can be used to analyze business units or product lines of corporations (Priem & Butler, 2001).

Organizations use the BCG matrix to make long term strategic plans and identify opportunities for growth. The strategic management tool is used to review the organization’s product portfolios with an aim of making decisions on whether to develop a new product, discontinue existing products, or invest more on existing products.

The BCG matrix is divided into four quadrants, each quadrant representing a specific group or types of products depending on their growth potential and relative market share.

From the diagram, BCG categorizes products into question marks, dogs, stars, or cash cows.

Question Marks

Question marks refer to those products which have low market share, but operate in markets with high growth (Bradley, 2010). They have potential but still needs heavy investments in order to be successful.

Stars

Stars are high growth products which compete in markets where they are stronger than competitors. They have a good potential for future growth. Stars also need heavy investments in order to sustain growth.

Cash Cows

Cash cows are included in the bottom left quadrant of the BCG Matrix. They are products experiencing low growth but with a high market share. Cash cows generates massive cash for the business, so they need to be prioritized by redirecting resources and time to maximize their sales.

Dogs

Finally, dogs have a low market share in markets which experience low growth (mature markets). A dog is therefore a product that does not need heavy investment like a star and does not generate strong cash like a cash cow. It needs to be retired to avoid losses and unnecessary expenses.

The BCG Matrix can be used to solve the problems that organizations face as they formulate and implement growth strategies. In order to achieve high market share and high market growth, companies should analyze their product portfolios using this strategic analysis tool.

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