BCG Matrix
Portfolio analysis with Stars, Cash Cows, Dogs, and Question Marks for strategic resource allocation.
PURPOSE
Companies with multiple business units or products need to strategically allocate their limited resources but often do not know where investments create the most value. The BCG Matrix helps classify the portfolio by market growth and relative market share, and derive investment, hold, or divestment decisions from it. It prevents all business units from being treated equally.
HOW TO USE
Each business unit or product is positioned on a 2x2 matrix, with market growth on the vertical axis and relative market share on the horizontal axis. This results in four categories: Stars, Cash Cows, Question Marks, and Dogs. Each category has a typical standard strategy: invest, harvest, selectively invest, or divest.
WHAT IT IS
The BCG Matrix (also known as the Growth-Share Matrix) is a portfolio analysis tool developed by the Boston Consulting Group in 1970. It classifies business units into four quadrants: Stars (high growth, high share), Cash Cows (low growth, high share), Question Marks (high growth, low share), and Dogs (low growth, low share). It is one of the most well-known strategic frameworks and is used worldwide in corporate planning.
EXAMPLE
Example: Your consumer goods corporation has twelve product lines and management is debating which to expand further and which to discontinue. You use the BCG Matrix, classify each product line by relative market share and market growth, and identify your Cash Cows, Stars, Question Marks, and Dogs.