What Is a BCG Growth-Share Matrix?

The Boston Consulting Group (BCG) growth-share matrix is a planning

tool that uses graphical representations of a company’s products and
services in an effort to help the company decide what it should keep, sell,
or invest more in.

The matrix plots a company’s offerings in a four-square matrix, with the y-

axis representing the rate of market growth and the x-axis representing
market share. It was introduced by the Boston Consulting Group in 1970.

KEY TAKEAWAYS

 The BCG growth-share matrix is a tool used internally by

management to evaluate the current state of value of a firm's units or
product lines.
 BCG stands for the Boston Consulting Group, a well-respected
management consulting firm.
 The growth-share matrix helps the company in deciding which
products or units to either keep, sell, or invest more in.
 The BCG growth-share matrix contains four categories: "dogs,"
"cash cows," "stars," and “question marks.”
 The matrix helps companies decide how to prioritize their various
business activities.

Understanding a BCG Growth-Share Matrix

The BCG growth-share matrix breaks down products into four categories,
known as "dogs," "cash cows," "stars," and “question marks.” Each
category quadrant has its own set of unique characteristics.

Dogs (or Pets)

If a company’s product has a low market share and is at a low rate of

growth, it is considered a “dog” and should be sold, liquidated, or
repositioned.
 Dogs, found in the lower right quadrant of the grid, don't generate much
cash for the company since they have low market share and little to no
growth.

Because of this, dogs can turn out to be cash traps, tying up company
funds for long periods of time.
Cash Cows
Products that are in low-growth areas but for which the company has a
relatively large market share are considered “cash cows,” and the
company should thus milk the cash cow for as long as it can.

Cash cows, seen in the lower left quadrant, are typically leading products
in markets

Generally, these products generate returns that are higher than the market's
growth rate and sustain itself from a cash flow perspective. These products
should be taken advantage of for as long as possible. The value of cash
cows can be easily calculated since their cash flow patterns are highly
predictable. In effect, low-growth, high-share cash cows should be milked
for cash to reinvest in high-growth, high-share “stars” with high future
potential.

Stars

Products that are in high growth markets and that make up a sizable portion
of that market are considered “stars” and should be invested in more. In the
upper left quadrant are stars, which generate high income but also consume
large amounts of company cash.

If a star can remain a market leader, it eventually becomes a cash cow when
the market's overall growth rate declines

Question Marks

Questionable opportunities are those in high growth rate markets but in which
the company does not maintain a large market share.
Question marks are in the upper right. They typically grow fast but consume
large amounts of company resources. Products in this quadrant should be
analyzed frequently and closely to see if they are worth maintaining.

Other Factors to Consider

The matrix is a decision-making tool, and it does not necessarily take into
account all the factors that a business must face. For example, increasing
market share may be more expensive than the additional revenue gained from
new sales. Because product development may take years, businesses must
plan for possibilities carefully.

The BCG Growth-Share Matrix uses a 2x2 grid with growth on one axis and
market share on the other. Each of the four quadrants represents a specific
combination of relative market share, and growth:

Low Growth, High Share. Companies should milk these “cash cows” for cash
to reinvest elsewhere.

High Growth, High Share. Companies should significantly invest in these

“stars” as they have high future potential.

High Growth, Low Share. Companies should invest in or discard these

“question marks,” depending on their chances of becoming stars.

Low Share, Low Growth. Companies should liquidate, divest, or reposition

these “pets.”

The BCG Growth-Share Matrix considers a company's growth prospects and

available market share via a 2x2 grid. By assigning each business to one of
these four categories, executives can then decide where to focus their
resources and capital to generate the most value, as well as where to cut their
losses.

According to BCG, at the height of its success, the growth share matrix was
used by about half of all Fortune 500 companies; today, it is still central in
business school teachings on business strategy.

The Bottom Line

The BCG Growth-Share Matrix is a business management tool that allows

companies to identify the aspects of their business that should be prioritized
and which might be jettisoned. By constructing a 2x2 table along the
dimensions of growth and market share, a company's businesses can be
categorized into one of four classifications: "stars," "pets," "cash cows," and
"question marks."

Related Terms
Problem Child
A problem child is one of the four categories in the growth-market share matrix
describing a business with a small market share in a rapidly growing industry.

Cash Cow: Definition, Investment Type, and Examples

A cash cow is one of the four BCG matrix categories that represents a product
or business with high market share and low market growth.
Product Life Cycle Explained: Stage and Examples
Every product has a life cycle, and reevaluating it at each phase is considered
important to managing its commercial success.
What Is a Dog in Business? Definition, Meaning, and Example
A dog is a business unit with a small market share in a mature industry. It
neither generates strong cash flow nor requires a big investment.

Star
A star is a candlestick formation that happens when a small bodied-candle is
positioned above the price range of the previous candle.
stock market analysis and portfolio managers can download BCG matrix
PowerPoint slide to show the market share and growth rate of different
companies and whether the company belongs to dog cell, question mark cell,
star cell, or cash cow cell. This may enable both presenter and the viewer to
comprehend each section in a easy to understand fashion.