Strategic Product Management - BCG Matrix

1. Strategic
Product
Management
BCG Growth-Share Matrix
/PGDM/KIAMS/2021 A publication of
Dr. Rajesh K Satpathy

2. BCG Growth-Share Matrix

3. What is the Growth Share Matrix?
The growth share matrix was created in 1968 by BCG’s founder,
Bruce Henderson. It was published in one of BCG’s short,
provocative essays, called Perspectives.
At the height of its success, the growth share matrix was used by
about half of all Fortune 500 companies; today, it is still central in
business school teachings on strategy.
BCG Growth-Share Matrix

4. The Boston Consulting Group (BCG) growth-share matrix 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.
The matrix plots a company’s offerings in a four-square matrix,
with the y-axis representing the rate of market growth and the
x-axis representing market share.
BCG Growth-Share Matrix

5. The BCG growth-share matrix breaks down products into four
categories, known heuristically as "dogs," "cash cows," "stars,"
and “question marks.”
Each category quadrant has its own set of unique characteristics.
Understanding a BCG Growth-Share Matrix

7. The growth share matrix was built on the logic that market
leadership results in sustainable superior returns.
Ultimately, the market leader obtains a self-reinforcing cost
advantage that competitors find difficult to replicate. These high
growth rates then signal which markets have the most growth
potential.
How Does the Growth Share Matrix Work?

9. The matrix reveals two factors that companies should consider
when deciding where to invest—company competitiveness, and
market attractiveness—with relative market share and growth rate
as the underlying drivers of these factors.
How Does the Growth Share Matrix Work?

10. Each of the four quadrants represents a specific combination of relative
market share, and growth…
Low Growth, High Share. Companies should milk these “cash cows” for cash to
reinvest.
High Growth, High Share. Companies should significantly invest in these “stars”
as they have high future potential.
High Growth, Low Share. Companies should invest in or discard these “question
marks,” depending on their chances of becoming stars.
Low Share, Low Growth. Companies should liquidate, divest, or reposition these
“pets.”
How Does the Growth Share Matrix Work?

12. Dogs (or Pets)…
If a company’s product has a low market share and is at a low rate of
growth, it is considered a “dog” and should be sold, liquidated, or
repositioned. Dogs, found in the lower right quadrant of the grid, don't
generate much cash for the company since they have low market share
and little to no growth.
Because of this, dogs can turn out to be cash traps, tying up company
funds for long periods of time. For this reason, they are prime candidates
for divestiture.
How Does the Growth Share Matrix Work?

14. Cash Cows…
Products that are in low-growth areas but for which the company has a relatively
large market share are considered “cash cows,” and the company should thus milk
the cash cow for as long as it can. Cash cows, seen in the lower left quadrant, are
typically leading products in markets that are mature.
Generally, these products generate returns that are higher than the market's
growth rate and sustain itself from a cash flow perspective. These products should
be taken advantage of for as long as possible. The value of cash cows can be easily
calculated since their cash flow patterns are highly predictable. In effect, low-
growth, high-share cash cows should be milked for cash to reinvest in high-
growth, high-share “stars” with high future potential.
How Does the Growth Share Matrix Work?

16. Stars…
Products that are in high growth markets and that make up a sizable portion of
that market are considered “stars” and should be invested in more. In the upper
left quadrant are stars, which generate high income but also consume large
amounts of company cash.
If a star can remain a market leader, it eventually becomes a cash cow when the
market's overall growth rate declines.
How Does the Growth Share Matrix Work?

17. Question Marks…
Questionable opportunities are those in high growth rate markets but in which the
company does not maintain a large market share. Question marks are in the upper
right portion of the grid.
They typically grow fast but consume large amounts of company resources.
Products in this quadrant should be analyzed frequently and closely to see if they
are worth maintaining.
How Does the Growth Share Matrix Work?

18. Special Considerations…
The matrix is a decision-making tool, and it does not
necessarily take into account all the factors that a business
ultimately must face.
For example, increasing market share may be more expensive
than the additional revenue gain from new sales. Because
product development may take years, businesses must plan
for contingencies carefully.
How Does the Growth Share Matrix Work?

19. Thank You !!