Boston Consulting Group
(BCG) Matrix
• A business planning tool used to evaluate the strategic
position of a firm's’ brand portfolio.
• What is the Boston Consulting Group (BCG) Matrix?
• The Boston Consulting Group Matrix (BCG Matrix), also referred to
as the product portfolio matrix, is a business planning tool used to
evaluate the strategic position of a firm’s brand portfolio.
• The BCG Matrix is one of the most popular portfolio analysis
methods. It classifies a firm’s product and/or services into a two-by-
two matrix. Each quadrant is classified as low or high performance,
depending on the relative market share and market growth rate.
Understanding the Boston Consulting Group (BCG) Matrix
• Understanding the Boston Consulting Group (BCG)
Matrix
• The horizontal axis of the BCG Matrix represents the amount
of market share of a product and its strength in the
particular market. By using relative market share, it helps
measure a company’s competitiveness.
• The vertical axis of the BCG Matrix represents the growth
rate of a product and its potential to grow in a particular
market.
There are four quadrants in the BCG Matrix:
[Link] marks: Products with high market
growth but a low market share.
[Link]: Products with high market growth and
a high market share.
[Link]: Products with low market growth and a
low market share.
[Link] cows: Products with low market growth
but a high market share.
Important……
The assumption in the matrix is that an increase in relative market
share will result in increased cash flow.
A firm benefits from utilizing economies of scale and gains a cost
advantage relative to competitors.
The market growth rate varies from industry to industry but usually
shows a cut-off point of 10% – growth rates higher than 10% are
considered high, while growth rates lower than 10% are considered
low.
The BCG Matrix: Question Marks
• Products in the question marks quadrant are in a market that is growing
quickly but where the product(s) have a low market share.
• Question marks are the most managerially intensive products and require
extensive investment and resources to increase their market share.
• Investments in question marks are typically funded by cash flows from
the cash cow quadrant.
• In the best-case scenario, a firm would ideally want to turn question
marks into stars (as indicated by A).
• If question marks do not succeed in becoming a market leader, they end
up becoming dogs when market growth declines.
The BCG Matrix and Strategic choices
•Build strategy. Create a new brand and a new target
audience by means of a Question Mark.
•Hold strategy. Maintain this success and benefit from
market growth by means of a Star..
•Harvest strategy. Make as much money as possible
with the product by means of the Cash Cow. ...
•Divest strategy.
The BCG Matrix: Dogs
Products in the dogs quadrant are in a market that is growing
slowly and where the product(s) have a low market share.
Products in the dogs quadrant are typically able to sustain
themselves and provide cash flows, but the products will never
reach the stars quadrant.
Firms typically phase out products in the dogs quadrant (as
indicated by B) unless the products are complementary to
existing products or are used for a competitive purpose.
The BCG Matrix: Stars
• Products in the star quadrant are in a market that is growing
quickly and one where the product(s) have a high market
share.
• Products in the stars quadrant are market-leading products
and require significant investment to retain their market
position, boost growth, and maintain a competitive advantage.
• Stars consume a significant amount of cash but also generate
large cash flows. As the market matures and the products
remain successful, stars will migrate to become cash cows.
The BCG Matrix: Cash Cows
Products in the cash cows quadrant are in a market that is growing
slowly and where the product(s) have a high market share.
Products in the cash cows quadrant are thought of as products that
are leaders in the marketplace.
The products already have a significant amount of investments in
them and do not require significant further investments to maintain
their position.
Cash flows generated by cash cows are high and are generally used to
finance stars and question marks.
Products in the cash cows quadrant are “milked” and firms invest as
little cash as possible while reaping the profits generated from the
products.
Example 1: BCG Matrix Apple
strategic analysis of Apple products: 👇
•Stars – iPhone: from Apple’s beginning, the iPhone has been THE flagship product!
Its demand is very high and its growth is uncertain, as there are more and
more competitors.
•Cashcows – MacBook: this laptop is one of the market-leader today. It is produced in
large quantities and its quality is recognized, hence its high selling price.
•Question marks – Apple TV: this is a new product that has a low profitability for the
moment, because it is not up to date with its competitors like Amazon “Fire
stick”/Alexa, etc. Nevertheless, it has a strong growth potential.
•Dogs – iPad: has become a niche product for graphic designers and businesses. But
it’s not the novelty it was a few years ago, so growth is low.
Example 2: BCG Matrix – Google
strategic analysis of Google products: 👇
•Stars – YouTube : YouTube is also a flagship product. Did you know that over 500 hours of content is
uploaded to YouTube every minute? Growth and expansion is touching the sky for this one.
•Cash cows – “Google searh & Ads ” : And as far as the Google search engine is concerned, about 70% of
the world’s population uses it. Thus, making it dominant in the relative market share. Available on both
desktop computers and mobile devices, it is the browser of choice for many people: on all platforms.
•Question marks – “Drive & Docs” : Google Drive and Docs are one example. The demand for data storage
and protection has increased the market for cloud storage. Google Drive and Docs have potential and high
market growth, but face less money back due to high market share of their competitor.
•Dogs – “Google Play” : This product was not a total failure, in terms of ideas. Google Video was launched
in late January 2005 and 22 months later Google bought YouTube for $1.65 billion. And now you find all the
videos on YouTube, hence the failure of Google Play video player to generate revenue.
Conclusion BCG matrix: 4 product categories to remember!
[Link] Matrix Star Products:
“Star” products are positioned in growth markets with a dominant market share. They are the flagship prod
ucts currently of a company. They contribute to the growth of the company. However, for this category of
products, you have to differentiate yourself from competitors and
that requires significant investments , especially in communication and marketing. 🎯
[Link] Matrix Cash Cow Products:
“Cash cow” products are positioned in slow-growth markets, but has a dominant position , i.e. they
havea high market share.
💪 These products do not require a large investment compared to the margins earned by
the company, and these products ensure the financial strength of the company. It
is often the “Star” product that allowed the company to grow before. 💰 Therefore, they must be
preserved unless they become “Dogs “.
03. BCG M a t r i x Q ue s t i o n m ar k Pr odu c t s :
“Question mark” products have a high competitive strategy but generate little profit.
🤷 They are represented by products with a low share from market. Either they
will become “Star” products (because growing market) or they will become“Dogs” (since not
enough profit).
[Link] Matrix Dog products:
They represent a small market share in a slow moving market. 👎 They are called “dogs“ because
they add no value
proposition to the company’s growth and profits. In fact, they are products that do
not add profitability (anymore).
