BCG GROWTH-SHARE MATRIX in marketing to find out in which products to invest, sell or keep.

1. Boston
Consulting
Group (BCG)
Matrix
By Honey Ramchandani

2. BCG MATRIX tool depends on product
life cycle theory. It is a planning tool that
uses graphical representations of a
company’s products and services in an
effort to help the company decide what it
should keep, sell or invest more in. It helps
to find the current state of value of a firm’s
units or product lines.

3. RELEVANCE & IMPORTANCE OF BCG MATRIX
It was developed in the early 70s by the Boston
Consulting Group.
The BCG Matrix method is the most well-known
portfolio management tool.
It is based on product life cycle theory.

4. Relevance & Importance of BCG Matrix
To ensure long-term value creation, a company
should have a portfolio of products that contains
both
 High-growth products in need of cash inputs
and
 Low-growth products that generate a lot of
cash.
Used to determine what priorities should be given
in the product portfolio of a business unit.

5. Relevance & Importance of BCG Matrix
The BCG Matrix has 2 dimensions :
 Relative Market share and
 Market growth.
The basic idea behind it is : if a product has a
bigger market share or if the product's market
grows faster, it is better for the company.

7. Star (high growth, high market share)
Stars use large amounts of cash.
Stars are leaders in the business.
Stars usually generate cash for the company
It is critical that Stars should hold the market
share,
because the future rewards are generally
cash cows.

8. Cash Cows
(low growth, high market share)
 Profits and cash generation should be high.
 Low market growth does not attract new competitors
 Low market growth, call for less investments
Cash Cows are often the stars of yesterday
and they are the foundation of a company.

9. Dogs (low growth, low market share)
 Avoid and minimize the number of Dogs
 Watch out for expensive 'rescue plans'
 Low growth coupled with market share is generally
a loss making proposition for a company
Dogs must deliver cash, otherwise they
must be liquidated.

10. Question Marks (high growth, low market share)
 Question Marks have the worst cash
characteristics of all,
 Question Marks have high cash demands
(High Mkt growth)
 Question Marks generate low returns,
(Low market share)
 If the market share remains unchanged, Question
Marks will simply absorb great amounts of cash
Either invest heavily, or sell off, or invest
nothing and generate any cash that you can.

11. Outcomes of such a strategy:
•Cash Cows Business Units will reach their profit
target easily. They are often allowed to reinvest
substantial cash amounts in their mature business.
•Dogs Business Units are fighting an impossible battle
and, even worse, now and then investments are
made.
•Question Marks and Stars receive only mediocre
investment funds, hence they can never become
Cash Cows (or Stars)

12. Limitations of BCG Matrix
1. It neglects the effects of synergy between
business units.
2. High market share is not the only success factor.
3. Market growth is not the only indicator for
attractiveness of a market.
4. Sometimes Dogs can earn even more cash as
Cash Cows.
5. There is no clear definition of what constitutes a
'market”.

13. Limitations of BCG Matrix
6. A high market share does not necessarily lead to
profitability all the time.
7. The model uses only two dimensions – market share
and growth rate. So companies may be tempted to
divest prematurely.
8. A business with a low market share can be
profitable too.
9. The model neglects small competitors that have
fast growing market shares.