Differences Between BCG Matrix and Ansoff Matrix

Differences Between BCG Matrix and Ansoff Matrix

The Boston Consulting Group (BCG) tool matrix is one of the tools used in product portfolio analysis. It's used to determine business growth opportunities and to decide on investment priorities. It's main axes are market growth versus market share.
The Ansoff Matrix is also a business strategy tool, is also used to determine business growth opportunities and to decide on investment priorities. It's main axes are New/Current Markets and Products.
Beyond this, do any further differences exist between the BGG Matrix and the Ansoff Matrix?

Craig Rhinehart
Entrepreneur, United States

Somewhat Similar But not Used for the Same Purpose

According to BCG... Each of the four Growth Share Matrix quadrants represents a specific combination of relative market share and growth objectives. In other words, it helps to DETERMINE INVESTMENT ALLOCATION AMONG EXISTING PORTFOLIO OPTIONS:

1. Low Growth, High Share: Companies should milk these "Cash cows" for cash to reinvest.
2. High Growth, High Share: Companies should significantly invest in these "Stars" as they have high future potential.
3. High Growth, Low Share: Companies should invest in or discard these "Question marks," depending on their chances of becoming stars.
4. Low Share, Low Growth: Companies should liquidate, divest, or reposition these "Dogs (pets)".

Also according to BCG … product value depends entirely on whether or not a company is able to obtain a leading share of its market before growth slows. All products will eventually become either cash cows or pets. Pets are unnecessary … they are evidence of failure to either obtain a leadership position or to get out and cut the losses.

The Ansoff Matrix is different … it is a tool used by firms to analyze and plan their strategies for ALL growth options … not just those already being invested in as part of the portfolio. The matrix shows FOUR STRATEGIES THAT CAN BE USED TO HELP A FIRM GROW AND ALSO ANALYZES THE RISK ASSOCIATED WITH EACH STRATEGY.

The four strategies of the Ansoff Matrix are:
1. Market Penetration: This focuses on increasing sales of existing products to an existing market.
2. Product Development: Focuses on introducing new products to an existing market.
3. Market Development: This strategy focuses on entering a new market using existing products.
4. Diversification: Focuses on entering a new market with the introduction of new products.
Of the four strategies, market penetration is the least risky, while diversification is the riskiest.

Both are useful tools. The McKinsey Three Horizons model is useful for portfolio investments also.