BCG also known as Boston Consulting Group

• BCG Matrix is a chart that was created by Bruce Henderson for the Boston
Consulting group in 1970 to help corporation to analyze their product lines.
• The BCG Matrix is a graphical representation tool used by companies to assess
the market worth of their products and services. In any market, there are bound
to be competitors or rivals, and this competitor may create identical products. It
is also used as an analytical tool in brand marketing, product management,
strategic management, and portfolio analysis to help the organization allocate
resources.

According to Bruce Henderson, ‘to be successful, a company or business should have a portfolio
of products with different growth rates and different market shares.
BCG Matrix
: Boston Consulting Groups assist multidivisional firm in formulating strategies
: Autonomous division = business portfolio
: Divisions may compete in different industries
: Focus on relative market-share position & industry growth rate

WHY A NEED TO HAVE BCG MATRIX?

The chart is a tool, where the company’s products and services can be plotted to help make key
business decisions. These decision include whether to keep a particular business unit, sell it, or
invest more in it
➢ Market share or is also known as the x-axis is the percentage of either revenue or
volume of sales that the company has of total market
➢ Market growth or is also known as the y-axis is used as a measure of how attractive a
market is to existing providers and potential new entrants.
The BCG matrix is divided into four quadrants. It denotes a type of business that makes use of
specific resources and generates specific revenue. The following are the categories: (1) Cash
cows (2) Dogs (3) Question marks (4) Stars.
1. CASH COW (high market share, low market growth
- Cash cows are the leaders in the marketplace and generate more cash than they
consume. These are business units or products that have high market share, but low growth
prospect.
2. DOGS (low market share, low market growth)
- Product classified as dogs always have a weak market share in a low growth market.
These products are very likely making a loss or a very low profit at best. These products can be
a big drain on management time and resources.
3. QUESTION MARK (low market share, high market growth)
- Question mark has a low market share in a fast-growing market. Whilst this type of
product is likely to generate some revenue it may not be enough to sustain rapid growth and it
may become a net consumer of cash as it struggles to retain its market share.
4. STARS (high market share, high market growth)
- Stars are leaders in business.
- They also require heavy investment, to maintain its large market share.
- It leads to large amount cash consumption and cash generation.