The BCG matrix, also known as the Boston Consulting Group Growth-Share matrix developed by Boston Consulting Group in 1970, is a strategic planning tool uses graphical representations of the company’s products and services in order to assist the company to decide on the products it should keep, the ones to let go and the ones to invest more on.
This matrix is a 4*4 square matrix, with the Y-Axis representing the market growth and the X-axis representing the market share. The matrix has 4 distinct categories namely, Dogs, Cash Cows, Question Marks and Stars.
- Dogs (or pets): The products that have a low market share and low rate of market growth fall into the category of dogs. These products are considered to be sold, liquidated or repositioned in the market as they aren’t really generating profits to the company. The products lying in this segment keep the capital of the company tied up which could have been utilized elsewhere.
- Cash Cows: The products that have a great market share but are low on growth areas fall under the category of cash cows. These are typically the leading products in the market that the company should nurture more as these generate great revenue to the firm. There returns are high and they sustain themselves from the cash flow perspective. These products should be taken advantage for as long as possible.
- Stars: Products that are in high growth market and make a comparative high market share are considered as the star products of the company, but because the market is growing rapidly, these products require a lot of investments on regular basis. But if a star can maintain its position in the market, it eventually becomes a cash cow.
- Question Mark: The products that are in the high growth markets but relatively hold a low market share is the question marks for the company. These products can be considered as the problem child for the firm. These products usually grow fast but require a large amount of company resources to be invested. Products falling in this quadrant should be closely monitored and analyzed frequently.
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