The BCG growth share matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting group in the early 1970’s. It is based on the observation that a company’s business units can be classified into four categories based on combinations of “Market Growth” and “Market Share” relative to the largest competitor. The four categories are as follows.
They have a low market share and low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps as because of the money tied up in the business that has little potential.
E.g- Diet coke, Minute maid (Low Growth, Low Market Share)
Question marks grow rapidly, thus consume a large amount of cash, but because of their low market share, they generate less cash. A question mark has the potential to gain market share and become a star, and eventually the cash cow when the market growth slows.
E.g- Fanta, Sprite (High Growth, Low Market Share)
They generate a large amount of cash because of their market share. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines.
E.g- Thums UP, Maaza (High Growth, High Market Share)
Cash cows have the largest market share. They require little investment and generate cash to turn question marks into market leaders or to invest in other business activities.
E.g- Limca, Coca-cola (Low Growth, High Market Share)