Boston Consulting Group

Boston Consulting Group (BCG) Growth-
Share Matrix
Last updated: December 1, 2023 by Ovidijus Jurevicius
Definition
BCG matrix (or growth-share matrix) is a corporate planning tool which
is used to portray a firm’s brand portfolio or SBUs on a quadrant along
the relative market share axis (horizontal axis) and speed of market
growth (vertical axis) axis.
Growth-share matrix is a business tool which uses relative market share

and industry growth rate factors to evaluate the potential of a business
brand portfolio and suggest further investment strategies.
What is the Boston Consulting Group (BCG)

Growth-Share Matrix
BCG matrix is a framework created by Boston Consulting Group to

evaluate the strategic position of the business brand portfolio and its
potential. It classifies a business portfolio into four categories based on
industry attractiveness (growth rate of that industry) and competitive
position (relative market share).
These two dimensions reveal the likely profitability of the business

portfolio in terms of cash needed to support that unit and the cash
generated by it. The general purpose of the analysis is to help
understand which brands the firm should invest in and which ones
should be divested.
Relative market share. One of the dimensions used to evaluate a
business portfolio is relative market share. Higher corporate market
share results in higher cash returns. This is because a firm that produces
more, benefits from higher economies of scale and experience curve,
which results in higher profits. Nonetheless, it is worth to note that some
firms may experience the same benefits with lower production outputs
and lower market share.
Market growth rate. High market growth rate means higher earnings
and sometimes profits but it also consumes lots of cash, which is used as
an investment to stimulate further growth. Therefore, business units that
operate in rapid-growth industries are cash users and are worth investing
in only when they are expected to grow or maintain market share in the
future.
There are four quadrants into which firm brands are classified:
Dogs. Dogs hold a low market share compared to competitors and

operate in a slowly growing market. In general, they are not worth
investing in because they generate low or negative cash returns. But this
is not always the truth. Some dogs may be profitable for a long period of
time, they may provide synergies for other brands or SBUs or simply act
as a defense to counter competitors’ moves. Therefore, it is always
important to perform a deeper analysis of each brand or SBU to make
sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation
Cash cows. Cash cows are the most profitable brands and should be
“milked” to provide as much cash as possible. The cash gained from
“cows” should be invested in stars to support their further growth.
According to the growth-share matrix, corporates should not invest in
cash cows to induce growth but only to support them so they can
maintain their current market share. Again, this is not always the truth.
Cash cows are usually large corporations or SBUs that are capable of
innovating new products or processes, which may become new stars. If
there would be no support for cash cows, they would not be capable of
such innovations.
Strategic choices: Product development, diversification, divestiture,
retrenchment
Stars. Stars operate in high-growth industries and maintain high market

share. Stars are both cash generators and cash users. They are the
primary units in which the company should invest its money, because
stars are expected to become cash cows and generate positive cash
flows. Yet, not all stars become cash flows. This is especially true in
rapidly changing industries, where new innovative products can soon be
outcompeted by new technological advancements, so a star instead of
becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market
penetration, market development, product development
Question marks. Question marks are the brands that require much
closer consideration. They hold low market share in fast-growing
markets, consuming large amounts of cash and incurring losses. It has
the potential to gain market share and become a star, which would later
become a cash cow. Question marks do not always succeed and even
after a large amount of investments they struggle to gain market share
and eventually become dogs. Therefore, they require very close
consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product
development, divestiture

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Boston Consulting Group (BCG) Growth-

Growth-share matrix is a business tool which uses relative market share

What is the Boston Consulting Group (BCG)

BCG matrix is a framework created by Boston Consulting Group to

These two dimensions reveal the likely profitability of the business

Dogs. Dogs hold a low market share compared to competitors and

Stars. Stars operate in high-growth industries and maintain high market

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