The BCG matrix is a tool used to classify products and services based on their market share and market growth. It positions products in four categories: stars, cash cows, question marks, and dogs. Stars have high growth and market share, while cash cows have low growth but high share. Question marks have high growth but low share, requiring investment. Dogs have low growth and share and should be minimized. The matrix helps companies balance investing in growth products while maintaining profitable mature products to fund growth.

1. BCG Matrix
= « Photography » of the Position
of The Company’s Products
What is the BCG Matrix?
The BCG matrix, invented by the Boston Consulting Group, is a tool that allows to classify and evaluate
the products and services of a business. It is a decision making tool in order to balance the activities of a
company among those which make profits, those who ensure growth, those which constitute the future of
the firm or those who are its heritage. With this tool one is able to define the development policy of the
company. The matrix will position the products/services in two ways:
the rate of growth of the market ;
the market share of a product/service offered facing the competitors
Golden Rules
Positioning = the company has to place each of its products/services on the matrix. Thus it is able to
obtain information on the market share of the product or service and the market growth.
Creating long-term value = the company should have a product portfolio that includes products with
high growth where it is necessary to inject cash and products where growth is weaker but which
generate a lot of cash.
Growth in market
Slow
Question marks
Need investment, but emit
more liquidity
Need to develop liquidity,
Brings in nothing
Cash Cows
Strong
Stars
Dogs
Realizes a lot of liquidities, they
finance other activities
Difficulties to survive, reduce all
costs or stop the product.
Strong
Weak
Market share on product
© Copyright 2008
LUXINNOVATION G.I.E.,
The National Agency for Innovation and Research in Luxembourg
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2. BCG Matrix
= « Photography » of The
Position of the Company’s Products
Structure of the BCG Matrix
Question marks
They do not generate profits unless the company decides to invest resources to maintain and even
increase the market share (become potential stars). They have a high demand for liquidity and the
company must ask the question: Invest or give up the product?
Stars
These are promising products for the company, they even can be considered as leaders of the industry.
The strategy is to boost these products by appropriate investments to monitor the growth and maintain a
position of strength. These products require a large amount of cash but also contribute to the company's
profitability. They are becoming progressively « cash cows » with market saturation.
Cash Cows
These are products or services which are mature and which generate interesting profits and cash, but
need to be replaced because the future growth will be lower. They must therefore be profitable because
they can finance other activities in progress (including « stars » and « question marks ».
Dogs
These products are positioned in a declining market and highly competitive and that the company wants
to get rid of soon as they become to expensive to maintain. The company must minimize the « dogs ».
The company must decide whether it still injects liquidity, otherwise it will eliminate the « dogs » in the
near future.
© Copyright 2008
LUXINNOVATION G.I.E.,
The National Agency for Innovation and Research in Luxembourg
2/2