What is the BCG matrix?
This growth vs share model provides an indication of which products an organization should invest in, those they should develop, and the ones they should get rid of. The model advocates that a company milks their cows, doesn’t waste money on the dogs, invests in the stars and applies some resources to the question marks to identify if they can become stars.
The BCG matrix was developed by the Boston Consulting Group and is also known as the BCG growth-share matrix, Boston matrix, product portfolio matrix, Boston box, Boston Consulting Group analysis, or a portfolio diagram.
Why use the BCG matrix?
The BCG matrix is a simple, easy to use tool that:
- Identifies products that are profitable now, those with potential, and those which are, or could be, a drain on resources
- Informs resource allocation across a product portfolio
Who should use the BCG matrix?
The BGG matrix is mainly used in organizations that have more than one product competing for resources. It can inform a number of different business functions including marketing, strategy, and portfolio planning.
BCG matrix template
The BCG matrix template plots products or product categories against two variables:
- Relative Market Share (horizontal axis) – the higher the market share, the more cash likely being generated. This measurement reflects a brand’s competitive position and is usually expressed as their market share relative to their closest competitor.
- Relative Market Growth (vertical axis) – products with high market growth rate usually have higher earnings but also consume lots of cash and require investment to pursue and maintain that growth. Market growth is a good indicator of industry attractiveness and gives an indication of a product’s future potential, overall market strength, and attractiveness to future competitors.
- have the potential to gain market share and become stars
- may eventually become cash cows when market growth slows
- can become dogs if they don’t succeed in becoming a market leader after a period of investment or the market growth declines.
- usually generate minimal profit
- are sometimes maintained for strategic purposes e.g., they provide jobs, have synergies with other business units, or are a defense against competitors.
- are question marks that have gained market share and are improving.
- can become cash cows as the market stabilizes.
- may become dogs if they lose their competitive edge, and the market becomes obsolete (not uncommon in technology fields).
- generate good profits and supply funds for future growth
- were often stars in market which has now matured and slowed
- don’t have many opportunities to expand as the market is growing too slowly for investment to be worthwhile.
- might become stars with further product development.
How to do a BCG analysis
The BCG matrix is based on the theory that in a natural business cycle products usually start as question marks, then become stars as the market grows. When that growth slows they become cash cows and eventually dogs. A diversified company will have products across the spectrum to ensure future growth and funding.
Market share – Estimate your market share by comparing your brand’s revenue with that of your largest competitor in the industry to get a ratio. If you are stronger, your share is greater than 1. If they are stronger, the number is less than 1. Even without exact figures, this process can still trigger valuable conversations.
Market Growth – Expressed in percentage terms. Found in industry reports or by analyzing revenue growth of leading firms
Identify products in the portfolio you’d like to consider.
Position the products on the matrix.
Identify actions based on the strategic options for the BCG categorization.
Share the outcomes of the session, including the action plan, with stakeholders.
Save effort, time and money with GroupMap
Whether you have your best minds together in the same room, or distributed around the world, GroupMap’s unique technology allows groups of up to 2000 to submit ideas independently at separate times, from different places, in different timezones. Prevent dominant personalities swaying the group, drowning out the opinions of others – GroupMap allows everyone to brainstorm independently then effortlessly combines that information to reveal the full spectrum of ideas. GroupMap templates keep the objective front and center throughout the session, keeping everyone on task. This ensures the activity identifies actionable issues rather than becoming just a discussion on ideas. GroupMap gives you all the group decision making tools you need to prioritize, decide and take action.
Create your first map and invite people in to start sharing their thoughts right NOW. Experience the power of GroupMap with our 14-day, no risk, FREE trial. You don’t even need to provide your credit card details to access to all of our features, including the entire suite of templates, for a full 14 days.