Boston Consulting Group, a market leader in the Management Consulting industry, is not only renowned for its handsome paycheck but also its impeccable work culture. The firm’s functional expertise and creative problem-solving approach offers clients a new and unique framework with every case. The growth-share matrix aka the BCG matrix was created by Bruce D. Henderson back in 1970 to help the company allocate resources and plan the analytics of brand marketing, product management, strategic management, and portfolio analysis.
To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis of their relative market shares and growth rates.
Cash Cows: High market share and low growth rate. Cash cows typically generate cash in excess; more than what is required to sustain the business. They are regarded as static and safe or even boring in a rapidly changing market and every corporation would be thrilled to own as many as possible. Cash cows should be “milked” continuously with as little investment as possible since heavy investments in slow-growing markets will usually result in a loss.
Dogs: Low market share and low growth rate. Dog units typically only “break even”, barely generating any liquid cash to sustain the business’ market share. From an accounting point of view, these units do not generate any cash for the company but can be kept around for charitable or social benefits such as providing jobs. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Generally, the best decision for Dog units is to be sold off.
Question marks: High market growth but low market share. Question marks are a starting point for most businesses. Question marks have a potential to gain market share and become stars, and eventually cash cows when market growth slows. If question marks do not succeed in becoming a market leader, then perhaps, after years of cash consumption, they will degenerate into dogs when market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.
Stars: High market share and high market growth rate. Stars are graduated Question marks with a niche leading trajectory. They are front-runners in a "mature" market with high growth rate, usually having dominant USPs, novelty promotions, very high customer loyalty, goodwill or monopolistic market shares. Stars hope to become the next Cash cows.
When Henrik Ibsen said, “A picture is worth a thousand words”, he was talking about the BCG matrix!
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