BCG Growth-Share Matrix
▰ Definition
 Is a portfolio planning model
developed by Bruce Henderson
from Boston Consulting Group in
early 1970.
 Company’s business units can be
classified into 4 categories based
on combinations of market growth
and market share (“growth-share).
▰ Theory
 1st assumption : This framework
assumes that increase in relative
market share will result in an
increase in the generating of cash.
 2nd assumption : A growing market
requires investment in assets to
increase capacity. Results in
consumption of cash.
1
 BCG MATRIX

▰ DOGS ▰ QUESTION MARKS

 Dog have low  Growing rapidly, thus
market share and consume large of cash.
low growth rate.
 But have low market share, so
 Neither generate not generate much cash.
nor consume a
large amount of  Also known as “problem –
cash. Child”.

 Cash trap- because  Has potential to gain market

money are tied up share to become star, but
in a business that after years being cash
has little potential. consumption it will
degenerate to become DOG
when the market growth 2
decline.
 BCG MATRIX

▰ STARS
▰ CASH COWS
 Generate large amount
 Leader in a mature market. It
of cash because strong
exhibit a return on assets that
relative market share.
is greater than the market
 If the market growth growth rate, thus, generate
decline, it can turn into more cash than consume.
cash cow.
 Cash cows provide cash that
 Portfolio of diversified required to turn Question
company always should Marks into market leaders.
have stars that will
become next cash cows
 To cover administrative cost
of the company, to fund
and ensure future cash
research to service corporate
generation.
debt and to pay dividend to 3
shareholders.
 BCG MATRIX

▰ LIMITATION
 Market growth rate is only ONE factor in industrial
attractiveness, relative market share is ONLY ONE factor in
competitive advantage. The growth-share matrix overlooks
many factors.
 The framework assumes that each business unit is
independent of the others. But some cases, DOG may
helping other business unit to gain competitive advantage.

▰ Footnote
 BCG Matrix still can serve as a simple tool for viewing a
corporate’s business portfolio at a glance and may serve as
a starting point for discussing resource allocation among
4
strategic business units.