BOSTON CONSULTING GROUP MATRIX
A business model for planning a product portfolio or finding balance in a number of different Strategic Business Units
A number of consultants from The Boston Consulting Group developed this matrix between 1968 and 1970. It is a framework for determining the future of your product or business portfolio. In 1970 they published the theory as “The Product Portfolio”.
The matrix has two dimensions. Firstly it considers the attractiveness of a market judged by its growth. The second considers each product’s market share relative to the largest competitor in the industry. The tool is made up of 4 squares or quadrants with relative market share along the x-axis and growth along the Y axis.
Stars: The upper left quadrant is for products of stellar performance. Products within this quadrant have a strong position in their marketplace and enjoy high growth.
Question marks: The top right quadrant contains products that need support. These products have a low relative market share and a market environment promising strong growth.
Cash Cows: The bottom left quadrant represents products with a relatively high market share though growth opportunities are low.
Dogs: The bottom right quadrant presents the exact opposite to stars in that a product positioned here has a low market share relative to the principal competitor and growth would similarly be low. Products in this square are labelled “dogs”.
BCG argues that a strong company should have a balanced portfolio. Dogs may or may not have a place in product portfolios. These apart, other products could be usefully distributed so that there are:
A small number of stars because their high share and high-growth secures a profitable future for the company. Their appetite for cash is high so they shouldn’t dominate a portfolio.
A good number of cash cows are to be recommended if possible because they supply funds to invest in the stars and question marks that will generate growth.
A good number of question marks are useful so that they can be cultivated (if possible) into stars.