BCG Matrix

Knowledge Center

12manage is looking for students. Info

Portfolio Management based on Market Share and Market Growth ('70).

The BCG Matrix method is the most well-known portfolio management tool. It is based on product life cycle theory. It was developed in the early 70s by the Boston Consulting Group. The BCG Matrix can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The Boston Consulting Group Matrix has 2 dimensions: market share and market growth. The basic idea behind it is: if a product has a bigger market share, or if the product's market grows faster, it is better for the company.

The BCG matrixThe four segments of the BCG Matrix

Placing products in the BCG matrix provides 4 categories in a portfolio of a company:

  • Stars (high growth, high market share)
    • Stars are using large amounts of cash. Stars are leaders in the business. Therefore they should also generate large amounts of cash.
    • Stars are frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold your market share in Stars, because the rewards will be Cash Cows if market share is kept.
  • Cash Cows (low growth, high market share)
    • Profits and cash generation should be high. Because of the low growth, investments which are needed should be low.
    • Cash Cows are often the stars of yesterday and they are the foundation of a company.
  • Dogs (low growth, low market share)
    • Avoid and minimize the number of Dogs in a company.
    • Watch out for expensive ‘rescue plans’.
    • Dogs must deliver cash, otherwise they must be liquidated.
  • Question Marks (high growth, low market share)
    • Question Marks have the worst cash characteristics of all, because they have high cash demands and generate low returns, because of their low market share.
    • If the market share remains unchanged, Question Marks will simply absorb great amounts of cash.
    • Either invest heavily, or sell off, or invest nothing and generate any cash that you can.

the BCG Matrix and one size fits all strategies

The BCG Matrix method can help to understand a frequently made strategy mistake: having a one size fits all strategy approach, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation.

In such a scenario:

  • Cash Cows Business Units will reach their profit target easily. Their management have an easy job. The executives are often praised anyhow. Even worse, they are often allowed to reinvest substantial cash amounts in their mature businesses.
  • Dogs Business Units are fighting an impossible battle and, even worse, now and then investments are made. These are hopeless attempts to "turn the business around".
  • As a result all Question Marks and Stars receive only mediocre investment funds. In this way they can never become Cash Cows. These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become Cash Cows (or Stars), or otherwise companies are advised to disinvest. They can then try to get any possible cash from the Question Marks that were not selected.

Other uses and benefits of the BCG Matrix

  • If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable.
  • BCG model is helpful for managers to evaluate balance in the firm’s current portfolio of Stars, Cash Cows, Question Marks and Dogs.
  • BCG method is applicable to large companies that seek volume and experience effects.
  • The model is simple and easy to understand.
  • It provides a base for management to decide and prepare for future actions.

Limitations of the BCG Matrix

Some limitations of the Boston Consulting Group Matrix include:

  • It neglects the effects of synergy between business units.

  • High market share is not the only success factor.

  • Market growth is not the only indicator for attractiveness of a market.

  • Sometimes Dogs can earn even more cash as Cash Cows.

  • The problems of getting data on the market share and market growth.

  • There is no clear definition of what constitutes a "market".

  • A high market share does not necessarily lead to profitability all the time.

  • The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely.

  • A business with a low market share can be profitable too.

  • The model neglects small competitors that have fast growing market shares.

Book: Carl W. Stern, George Stalk - Perspectives on Strategy from The Boston Consulting Group -

Special Interest Group - Strategic Portfolio Management

Special Interest Group (1515 members)

Forum - Strategic Portfolio Management  

Here you will find interesting and educational discussions.

  Lack of Question Marks? (1 reactions)
If a business has no Question Marks (or just one), what shou...
  The BCG Matrix: Reloaded (2 reactions)
(How) could the the BCG Matrix be adapted to include synergy...
  BCG Matrix Dog Strategies and Examples
What type of strategy and policies may be used by an organiz...
  How to do BCG Plotting? (3 reactions)
Hello everyone, I'm a little bit confused about how to pl...
  BCG in Emerging or Fragmented Markets (1 reactions)
The tool is really great, but how to use it in fragmented in...
  Use of BCG Matrix in India (1 reactions)
Which industries or Firms in India are using the BCG Matrix?...
  Advantages and Disadvantages of Portfolio Planning Tools
What are the pros and cons of portfolio planning tools like ...
  Application of BCG Matrix in Forestry (1 reactions)
Hello everyone, does anybody can help me with application of...
  BCG Matrix: not in All Cases
The matrix does not consider the place of traditional/gen...
  BCG Matrix: Can Dogs be More Lucrative than Cash Cows? (7 reactions)
Can someone support this statement with an example or a case...
  Cash Cows Should Fund Stars in BCG Matrix (1 reactions)
I think the cash cows should fund stars if they are cash hun...
  How to Calculate the Relative Market Share in BCG Matrix? (2 reactions)
In one of my company products' portfolio we are the market l...
  Distinction Between PLC and BCG Matrix? (4 reactions)
What are the similarities and differences between the produc...
  Not useful for Competitive Analysis
i am not sure if this matrix works to create a competition m...
  BCG Matrix Star Strategies and Examples (8 reactions)
What type of strategy and policies may be used by an organiz...
  Question Mark Strategies and Examples
What type of strategy and policies may be used by an organiz...
  BCG Matrix and Continous Evaluation (1 reactions)
Due to the highly dynamic environment in markets, the shelf ...
  Cash Cow Strategies and Examples
What type of strategy and policies could be used by an organ...
  BCG Matrix is Not Useful for a Start-up Having Only One Product (1 reactions)
How can a company entering the market with one product only,...
  The BCG Categories are not always Stages (1 reactions)
Note that it's not alway mandatory that a product goes throu...
Hot The Financing Assumption of the BCG Matrix
The BCG matrix is ​​a matrix based on a self-fin...
  BCG Matrix: How to Research the Market Share and the Market Growth for each Business?
I am having trouble on how to research companies to determin...
  Differences Between BCG Matrix and Ansoff Matrix (1 reactions)
The Boston Consulting Group (BCG) tool matrix is one of the ...
  Direction of Arrow between Cash Cow and Star Incorrect? (2 reactions)
I think the Cash Cow (with excess dollars) should fund the s...

Best Practices - Strategic Portfolio Management

Here you will find the most valuable ideas.

  10% Limit in Market Growth in BCG Matrix (7 reactions)
Generally in the BCG Matrix, when the market growth is more ...
  Example BCG Matrix: Coca Cola & Pepsi Cola (9 reactions)
The matrix is misrepresenting in some cases. Example: Coca C...
  How Do I Place my Products / Services in the BCG? (2 reactions)
Currently I'm trying to place the services of my company ...
  Why the Quadrants of BCG Matrix are Named as Star, Dog, Cow, Problem Child (2 reactions)
The BCG matrix's underlying assumptions are these: (i) High...
  BCG Matrix is useless! (8 reactions)
Totally useless (as a contemporary business tool)....

Expert Tips - Strategic Portfolio Management

Here you will find high-quality advice from experts.


Combine BCG Matrix (Market Share / Market Growth Rate) with a Margin / Market Growth Rate Matrix

Combining the Market Situation with Our Profitability...

Pitfalls of Applying Portfolio Matrices

Portfolio Management, Best Practices, Using BCG Matrix...

BCG Matrix Revisited

Improve BGC Matrix...

Reasons for the Decline in Use of the BCG Matrix


Resources - Strategic Portfolio Management

Here you will find powerpoint presentations, micro-learning videos and further information sources.

Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies

Core Competencies...

Diversification Strategy and Portfolio Management

Diversification, Corporate Strategy, Portfolio Management, Corporate Center...

How to Create BCG Matrices using Microsoft Excel

Creating BCG Matrix in Excel...

BCG on Corporate Strategy

What is Corporate Strategy, Corporate Strategy Implementation...

Introduction to the BCG Matrix

Understanding Portfolio Analysis by Using the BCG Matrix...

BCG Matrix Diagram

Portfolio Management...

News about Bcg Matrix


News about Strategic Portfolio Management


Videos about Bcg Matrix


Videos about Strategic Portfolio Management


Presentations about Bcg Matrix


Presentations about Strategic Portfolio Management


Books about Bcg Matrix


Books about Strategic Portfolio Management


More about Bcg Matrix


More about Strategic Portfolio Management


Compare with the BCG Matrix: McKinsey Matrix  |  ADL Matrix  |  Product/Market Grid  |  Stage-Gate  |  Three Dimensional Business Definition  |  Relative Value of Growth  |  Rule of Three  |  Core Competence  |  Bass Diffusion Model  |  STRATPORT  |  Profit Pools  |  Product Life Cycle  |  Blue Ocean Strategy  |  Four Trajectories of Industry Change  |  Positioning  |  Strategic Types

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing  |  Marketing  |  Strategy

More Management Methods, Models and Theory

Special Interest Group Leader

You here? Sign up for free


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2019 12manage - The Executive Fast Track. V15.1 - Last updated: 17-10-2019. All names ™ of their owners.