bcg matrix case study with solution

Best 10 BCG Matrix Examples for Students

Discover more helpful information.

BCG Matrix is an apparatus utilized to incorporate methodology to break down specialty units or product offerings dependent on two factors: relative piece of the overall industry and the market development rate. By joining these two factors into a matrix, an organization can plot their specialty units as needs are and figure out where to dispense extra (financial) assets, where to money out, and where to strip.

The primary reason for the BCG Matrix is accordingly to settle on speculation choices on a corporate level. Contingent upon how well the unit and the business are doing, four different classification names can be credited to every group:

• Question Marks

This article covers every classification and how to utilize the BCG Matrix appropriately.

10 Examples of BCG Matrix (of famous companies)

The BCG Model depends on items as opposed to administrations, be that as it may, it applies to both. You could utilize this if checking on a scope of items, particularly before growing new ones. Here are the example list:

1. BCG Matrix of Coca-Cola

A world-driving ready-to-drink refreshment company, Coca-Cola Company has more than 500 soda pop brands, from Fuse Tea to Oasis to Lilt to Powerade. Yet, none of them is anyplace near the coke brand in terms of mindfulness, income, and benefit.

Stage 1. Choose the Product/Firm/Brand

We pick the firm Coca-Cola for investigation. Also, you need to identify the market, as the picked market is beverages, diet cokes, and mineral water.

Stage 2. Calculate Relative Market Share & Find out the Market Growth Rate

By and tremendous Growth rate in Coke is that it is no: in more than 200 countries.

Stage 3. Draw the Circles on a Matrix

2. BCG Matrix of Samsung

Stage 1. choose the product/firm/brand.

We pick the firm Samsung for investigation.

The picked market is the consumer electronics industry which incorporates smartphones, computers, tablets, etc.

Stage 3. Calculate Relative Market Share

By and tremendous Growth rate in Samsung home appliances by making 60% of the sales.

Stage 4. Draw the circles on a matrix

3. BCG Matrix of L'Oréal

We pick the firm L'Oréal for investigation.

Stage 2. Identify Market

The picked market is the Cosmetics Industry, which essentially incorporates Skincare, Makeup, Haircare, Hair shading, and Fragrances.

Stage 4. Find out the Market Growth rate

By and tremendous Growth rate in Cosmetics Industry (starting at 2018) = 4.8%

Stage 5. Draw the circles on a matrix

Note: Just follow the above pattern with every example and BCG matrix you will be making for your class.

4. BCG Matrix of PepsiCo

5. BCG Matrix of Apple

6. BCG Matrix of Nestle

7. BCG Matrix of Unilever

8. BCG Matrix of McDonalds

9. BCG Matrix of KFC

10. BCG Matrix of Amazon

What is BCG Matrix?

The Boston Consulting Group's item portfolio matrix ( BCG matrix ), otherwise called the Growth/Share Matrix, is a vital arranging device that enables a business to consider development openings by inspecting its arrangement of items to choose where to contribute to suspend or create things. It's otherwise called the Growth/Share Matrix. The Matrix is separated into four quadrants dependent on an investigation of market development and the relative peace of the overall industry.

It depends on the mix of market development and the overall industry comparative with the following best contender.

High Growth, High Market Share

Star units are pioneers in the classification. Items situated in this quadrant are appealing as they are located in a hearty class, and these items are exceptionally serious in the classification.

2. Question Marks

High Growth, Low Market Share

Like the name proposes, the future capability of these items is dubious. Since the development rate is high here, with the correct systems and ventures, they can become Cash cows and, at last, Stars if they have a flat piece of the overall industry so that off-base ventures can downsize them to Dogs significantly after loads of speculation.

3. Cash Cows

Low Growth, High Market Share

In the long run, if you are working for quite a while working in the business, advertising development may decay, and incomes deteriorate. At this stage, your Stars are probably going to change into Cash Cows. Since they despise everything that has a substantial relative piece of the overall industry in a deteriorating (developed) market, benefits and cash streams are relied upon to be high. As a result of the lower development rate, ventures required ought to likewise below. Along these lines, cash cows ordinarily produce cash in an overabundance of the measure of money expected to keep up the business. This 'overabundance cash' should be 'drained' from the Cash Cow for interests in different specialty units (Stars and Question Marks). Cash Cows eventually carry parity and security to a portfolio.

Low Growth, Low Market Share

Dogs hold a flat piece of the overall industry contrasted with contenders. Neither do they create cash, nor do they require huge cash. As a rule, the resources are not worth putting into because they create low or negative cash returns and may need enormous entireties of money to help. Because of the flat piece of the pie, these items face cost inconveniences.

How to Make a BCG Matrix Diagram?

So far, we realize products are ordered in four sorts. Presently we will see on what premise and how that order is done. We will comprehend the five procedures of improving a BCG matrix by making one for L'Oréal in the areas to follow.

Stage 1. Choose the Product

BCG matrix can be utilized to operate Business Units, separate brands, products, or firms as a unit itself. The decision of the group impacts the entire investigation. Along these lines, characterizing the unit is essential.

Stage 2. Define the Market

A mistakenly characterized market can prompt a weak characterization of products. For instance, if we investigate Daimler's Mercedes-Benz vehicle brand in the traveler vehicle market, it would wind up as a dog (it holds under 20% relative market share). However, it would be a cash cow in the extravagant vehicle market. Characterizing the market is a significant pre-imperative for a better understanding of the portfolio position.

Stage 3. Calculate the Relative Market Share

Market share is the level of the entire market taken into account by your company, estimated either in income terms or unit volume terms.

We utilize Relative Market Share in a BCG matrix, contrasting our product deals and the main adversary's sales for a similar product.

Relative Market Share = Product's business this year/Leading opponent's business this year

For instance, if your rival's market share in the vehicle business was 25% and your association's image market share was 10% around the same time, your relative market share would be just 0.4. The relative market share is given on the x-axis.

Stage 4. Find out the Market Development Rate

The business development rate can be effortlessly found through free online sources. It can likewise be determined by deciding the healthy income development of the leading firms. The market development rate is estimated in rate terms.

Market development rate was typically given side-effects (business this year – Product's business a year ago)/Product's business a year ago.

Markets with high development are ones where the total market share accessible is growing, so there are a lot of chances for all organizations to bring in cash.

Stage 5. Draw the Circles on a Matrix

Having determined the above measures, you have to plot the brands on the Matrix simply on EdrawMind desktop version. It has the premade templates for BCG. All you have to do is put up the data just like we did with every example.

The x-axis shows the relative market share, and the they-pivot shows the business development rate. You can plan a hover for every unit/brand/product, the size of which ought to relate to the extent of income created by it in a perfect world.

Taken these variables together, you can attract the perfect way to follow the BCG Matrix, from start-up to market pioneer. Question Marks and Stars should be financed with ventures produced with Cash Cows. What's more, Dogs should be stripped or exchanged to let loose cash with minimal potential and use it somewhere else. At long last, you will require a reasonable arrangement of Question Marks, Stars, and Cash Cows to guarantee positive cash streams later on.

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BCG Matrix of Nestle [Detailed] Nestlé is a common house-hold brand for us since years. Think fast and tell me what all Nestlé products you love! I bet NesCafe, Maggi or chocolates like Kit-Kat made it to your favourite list. Now, have you ever wondered, that do firms also treat its products differently? How do they decide which brands to keep? Where to add new products? When to produce more goods? If yes, then this article is definitely curated for you. Give it a read and see how firms solve these critical questions.

Nestle is one of the world’s leading FMCG company. Most likely, dream company for most of the B-school students too. It has its presence in about 187 countries. Think how many market-segments and strategies it would be catering to! In order to understand their strategies, we have to get to know how  BCG matrix of Nestle works.

To serve its immensely heterogenous customers, they maintain a broad brand portfolio, with numerous products under it. And, yet is successfully leading in most of the markets worldwide.

Boston Consulting group’s product portfolio matrix is designed to help with long term strategic planning, to help a business consider growth opportunities. This is done by reviewing its portfolio of products to decide where to invest, to discontinue or develop products.

So, let’s not wait anymore, and start digging!

What is BCG matrix?

BCG matrix isn’t a new phenomenon. And, in the changing digital landscape, we can slurp a lot of information from it. In fact, we can also apply it for developing better marketing strategies.  

We will begin with understanding what are the quadrants of this matrix, how to interpret it, and many more things!

So, the Matrix is divided into 4 quadrants based on an analysis of market growth and relative market share, as shown in the diagram below.

Source: superheuristics.com

This matrix is, put simply, a portfolio management framework that helps companies decide how to prioritize their different businesses. It is a table, split into four quadrants, each with its own unique symbol that represents a certain degree of profitability. Quadrants being- question marks, stars, pets (often represented by a dog), and cash cows.

Now, let’s understand these quadrants better.

Each of the four quadrants represents a specific combination of relative market share, and growth:

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

High Growth, High Share: Firms must invest in these “stars” as they have high future potential.

High Growth, Low Share: Firms should invest in or discard these “question marks,” depending on their chances of becoming stars.

Low Share, Low Growth: Firms should liquidate, divest, or reposition these “pets.”

Okay, so imagine that you have your matrix. Is your problem solved? No more critical decisions? The answer is “no”. Your task as an MBA is to interpret what the BCG matrix of Nestle shows you.

For instance, “pets” might look like the least attractive product. Will you discard it? Or push it to become cash cow or star later?

Also Read:  The BCG Matrix – What is it and how to use it

Next, we should now start our analysis of BCG matrix of Nestle, India

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BCG Matrix of Nestle India

Here I am taking the case of Nestle, India specifically. Because, I aim at making it easily relatable for you. Now its time to check out the BCG Matrix of Nestlé and what products of the company fall under what Quadrant.

For Nestle, there are some products those have been undoubtedly the Cash Cows. They are- Nestle’s Maggi Noodles, NesCafe and its popular chocolates like KitKat, Munch.

With a market share of 80-85 %, Maggi Noodles holds a pseudo-monopoly in the market and have a high customer loyalty.

These products need very less investment. In fact, they are already available at every nook and cranny. And loved my most of us!

Stars 

In the case of Nestle, Nestle’s Mineral Water and Nestle’s Nescafe Coffee (like Nescafe Latte) fall in the Star quadrant of the BCG Matrix of Nestle.

With the growing number of health-conscious customers, these products have the potential to produce greater ROI later. Even though, it might take heavy investment to make Nestle-brand visible in that market, they may turn to cash-cows pretty soon!

Source: nestlepurelife.com

Question Mark

Now this is an interesting bunch of products!

Nestle Everyday, Nestlé slim and Nestlé Milk maid are some of the milk and milk-based products from the house of Nestlé. And they come under Question Mark category.

This domain needs a higher investment, because its in the phase of development. And it is a high-risk decision to invest in them too. Like for example, “É by Nescafé” ! Nestle aims to revolutionize coffee-making with this new smart coffee maker.

Source: enescafe.in

Products under this category are not expected to bring in any significant capital. So future investment is seen as a wastage by firms, it could be invested in a Question mark or Star category instead.

I believe Nestle Milo and Koko Crunch can be put in this category. They did not have any significant grasp in the market.

Source: Nestle.com

Its time to dig deeper. Let’s see how Nestle “milked” their Cash-Cow Maggi!!

Maggi- Milking the Cash cow!

Source: nestle.in

Do you know how has Nestle uses this as an opportunity?

Let me tell you some sad facts first. Nielsen points out that 85% of all consumer packaged goods (CPG) product launches flop.

Yet, Nestle never steps back from launching new products. And what’s a better way to do that than launching under the safety-net of “Maggi” brand?

Firstly, new variants of existing product lines have more chances of surviving out. Secondly, if gaining popularity then same distribution channels can be used, without extra efforts. And thirdly, analysts have noticed that Nestle doesn’t even feel the need to advertise them.

And lastly, as consumer already love Maggi’s brand, they hardly spend time for purchase decisions.

Now, the next segment is to know what strategy to follow, based on the growth-share matrix??

What Next to do with the Growth-Share Matrix?

We can use this matrix to decide on multiple fronts. Starting from resource allocation to utilization of marketing channels or platforms.

It can help grow a company’s expected ROI per channel. Now, it may vary for different B2B and B2C businesses and even across industry sectors.

For instance, high growth and high returns, investing in organic search (SEO) may be a good choice. At the other end of the scale, we have not witnessed companies growing exponentially and achieving high ROI as a result of Twitter alone.

Source: yewbiz.com

You can apply different strategy according to the quadrant you are in. The above image summaries a generic trend followed in the industry.

For understanding how the resource allocation is decided by firms do read our article on BCG matrix of ITC .

It tells you about how the matrix can help you to understand which resource allocation-strategy to use for which category. The strategies that are used by marketers are- Build, Hold, Harvest and Divest.

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We learnt why companies need a BCG matrix and what it is. Why it's such an essential tool for marketers.

We created The BCG Matrix of Nestle, keeping its broad product portfolio in mind. We identified the Matrix's various components, namely- Star, Cash Cow, Question Mark and Dog.

Next, we analysed how Nestle “milked” a cash cow- Maggi. Since Maggi is a well-know brand, hopefully this article provided a lucid clarity on how Nestle benefits from it.

And then we can see how can the matrix be used in order to decide where to invest and what platform to use, according to the quadrant.

Hope this article helped you!

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By Oliver Sealey |

 Reviewed By Rebecca Baldridge |

May 17, 2022

What is the BCG Matrix?

The Boston Consulting Group (BCG) designed its four-celled matrix, the BCG Matrix, to aid in long-term strategic planning. The matrix is used to assess the growth opportunities of different products/brands that an organization has in its portfolio based on relative market share and market growth rates across industries/sectors.

The matrix makes it possible to examine the business potential and market environment of different products and brands, which enables the company to decide where to invest, divest, or develop new products.

For credit analysts, the matrix can be a helpful framework for analyzing business risk, an essential part of deciding the credit-worthiness of a company.

In this article we’ll examine how the matrix categorizes products, giving examples. We’ll then see what actions companies can take having decided on the categories. Finally we’ll look at some of the limitations of the matrix.

Key Learning Points

• The BCG matrix is divided into four quadrants and is based on two parameters, relative market share and market growth rate
• The BCG Matrix includes four categories: stars, cash cows, question marks, and dogs
• To calculate the relative market share of a product, divide its market share by the market share of the product’s largest competitor
• This matrix can help businesses make good choices around their portfolio. For example, it can help companies decide which products should be their focus and which should be discontinued
• Care should be exercised around the use of the matrix. It can over-simplify concepts due to its two axis nature
• “High” and “low” market share and market growth determine which category a product ends up in, but deciding what “high” is can be difficult
• Defining the market can also be difficult. Deciding define the market broadly or more narrowly will make a big difference to the matrix and the categories it suggests for a company’s products.

BCG Matrix – Key Terminologies

The BCG matrix is divided into four quadrants and is based on two parameters – relative market share and the market growth rate. The horizontal axis of this matrix represents relative market share, while the vertical axis represents the market growth rate. The four cells of this matrix are designated stars, cash cows, question marks, and dogs. There are general actions associated with the 4 different types, but in the real world companies may of course decide to do something completely different if it suits their plans!

“High” and “Low”

The axes are categorized by “high” and “low”, which means there may be some difficult choices. When analyzing market growth, 10% is often used to decide a market is “high” growth. This can seem arbitrary. Imagine two markets, one with 10.1% growth, and another with 9.9% growth. Some judgement may be needed to decide what “high” and “low” mean in BCG market growth.

Market share is somewhat easier to analyze. The market share of all players in the market are compared. If the market share of the company being analyzed is greater than its next biggest rival, it’s deemed “high” (we’ll look at how that works in more detail later in this article).

Four Quadrants of the BCG Matrix

The four quadrants of the BCG Matrix are:

Exhibit high growth and command a high market share. A company should invest more in stars, as they are well-established products or brands in high-growth markets. Stars are leading brands in exciting markets. The Apple Watch in 2022 is a star. It’s selling around a third of smartwatches worldwide and has more than three times the market share of its nearest rival, Huawei. The market is predicted to grow by around 28% every year at this point, making it a very high-growth market. Despite being the market leader Apple will have to hold its position. This means it will have to spend a great deal on marketing, and making sure its product stays competitive. Because of this, as of 2022 the Apple watch probably isn’t the most cash-positive product in Apple’s portfolio. If Apple keep spending and making good choices, the watch market may mature and the Apple watch may become a cash cow. This would be the best outcome according to the BCG matrix.

Exhibit low market growth but command high market share. These are the ideal products to have, according to the BCG matrix. They are leading brands, in slower markets. It may seem counterintuitive that slower market growth would be seen as positive, but cash cows require little investment. The brand is dominant, and the fewer new buyers to the market will naturally gravitate to the brand. The market is less frenetic than before, and the company doesn’t have to spend as much cash winning the hearts and minds of all that growth!

The cash these products generate can be invested elsewhere. This is an important part of BCG, not immediately obvious from the diagram. The portfolio of a company should be a pipeline, with cash-positive products (primarily the cash cow) paying for the development of question marks and stars.

Coca-Cola has been a cash cow product for the Coca-Cola company for a long time. As of 2023, it holds around 46% of the soft drink market sales, far beyond its nearest rival. The market growth is modest, around 3.2% per year at this point. Coca-Cola has created excellent positive cashflows for the company, which they can use for other ventures such as their less mature food business. The part of Coca-Cola that doesn’t fit as well is the marketing spend. You’re probably aware of Coca-Cola adverts. A better BCG fit would have Coca-Cola not feeling the need to spend so much on marketing. Again, the real world means not everything fits nicely into a matrix.

Question Marks

Show high growth but command low market share. Question marks require significant investment to maintain or increase market share, but are excellent prospects for the company.

Question marks are usually recently introduced products with sound commercial prospects. With sufficient investment, they have the potential to become stars. If neglected, they may become dogs. Wise companies will know if they can’t build a question mark into a star. They’ll divest despite the exciting market.

It’s easy to think of examples of successful question marks, just think of any star or cash cow and rewind some years. It’s more interesting to think of a failed question mark. You could argue that Google Glass was a question mark that went wrong. Their wearable smart glasses were introduced around 2013. At that point, their market share of wearable tech was small, as not many wearable glasses were being sold compared to e.g. watches (this does rely on us putting glasses in with the broader “wearables” market, highlighting one issue of BCG: defining the market). But, the market was growing. It was arguably a case of “too early”, which is fairly common in tech. Google found the technology wasn’t quite good enough, and presumably was having to spend colossal amounts of money behind the scenes to develop, market and distribute the glasses. They ended up halting the production of the glasses in 2015.

Have both low growth and low market share. The bad performance may be due to high costs, inferior quality, or a lack of effective marketing.

Unless there is some hope of gaining market share, a company is wise to dispose of these products if they are a drain on cash. Dogs are often, but don’t have to be, cash negative.

Imagine you are the undisputed market leader in producing vinyl records in the 1990s. You probably have a great cash cow, but the years to come will reduce that to a dog. CDs and streaming will make your position obsolete and turn your product into a dog. It may be tempting to divest all dogs, but they may still be cash-generative. Vinyl now commands a premium price, so although they represent a slim minority of music sales it is still probably worth being in the market.

BCG Matrix – Advantages and Lim itations

The BCG matrix is very useful for manufacturing companies since an understanding of a product’s market position is imperative to understanding its growth potential.  The BCG matrix can also be used to assess the market share of a product relative to competing products. The matrix offers a useful framework for allocating resources to particular products.

However, the matrix does have certain limitations. First, markets may be less clearly defined than the matrix suggests. Moreover, it doesn’t offer information about what the competition is doing.  Second,  the market growth rate and relative market share are not the only indicators of profitability. Third, this four-quadrant approach may be overly simplistic considering the dynamic nature of markets and industries/sectors. Finally, a high market share does not always result in strong profits given that high costs may also be involved in maintaining that market share.

BCG Matrix – How to use the BCG Matrix

Using five parameters – the definition of the market, relative market share, market growth rate, cash generation, and usage of cash – a company should allocate its products to the relevant quadrant. Based on this allocation, the company can determine which products to invest in and which to discontinue.

It might be noted that defining the market is the most important step. If a market is incorrectly defined, the product could be incorrectly classified. The relative market share is calculated by dividing the selected product’s market share (or revenue) by the market share or revenue of the largest competitor in the sector. Moreover, it’s also necessary to calculate the market growth rate. This can be estimated by assessing the average revenue growth of the leading companies within the product sector.

BCG Matrix – Advantages and Limitations

The BCG matrix is very useful for companies since an understanding of a product’s market position is useful for understanding its growth potential.  The BCG matrix can also be used to assess the market share of a product relative to competing products. The matrix offers a useful framework for allocating resources to particular products and building a healthy pipeline in a product portfolio.

However, the matrix does have certain limitations. First, markets may be less clearly defined than the matrix suggests. We’ve seen in the examples that you could narrowly define the vinyl market, or put it as part of the wider music market.

Market growth rate and relative market share are not the only indicators of profitability. We saw that vinyl still has good cashflows for some companies, and question marks may not always be the best to build if it is a pointless drain on company resources with no future.

Finally, we need to be mindful that categorizing by “high” and “low” may lead to some products that are very similar being given different categories. Our earlier example of a 9.9 and 10.1% market growth is relevant here. Some judgment and discussion would be needed to get the most out of the matrix in this case.

Calculating Relative Market Share

The relative market share is used to compare a company’s brand market share with the market share of its largest competitor in the industry.  When we calculate relative market share, the market leader’s market share is used as the benchmark.

Relative Market Share Formula:

Relative Market Share = % market share of the company’s product divided by the market share of the largest competing product.

Below we’ve calculated the hypothetical relative market shares of two products from one company using the market share of the largest competitor in that industry. If you’d like to practice this yourself, please see the download attached to this article. This attachment has more products to practice on beyond what’s in the graphic below.

Brand B appears to be dominant in its market, far beyond the share of its nearest rival, rival 1. It is a star or cash cow, depending on the market growth.

Brand A is lagging. It operates in a different market to brand B, and can’t compete on share with its rival 1. It will be a question mark or dog.

The BCG matrix can be a helpful tool for thinking about a company’s portfolio. It creates clear categories and can create great discussions about the balance of products, their cashflows, and their future. It can also suggest sensible actions to create that balance. However, it should be treated with care. It is arguably too simple, reducing the world to two axes. It’s also important to think carefully about what the market is before starting the analysis.

For credit analysts, BCG can create a clear set of categories and language when putting together presentations on a company’s business risk.

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What is the bcg matrix explaining its components and quadrants.

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Understanding BCG Matrix

Strategic analysis is crucial in the world of finance, helping professionals make informed decisions to drive growth and maximize returns.

One such tool that has stood the test of time is the BCG Matrix . Developed by the Boston Consulting Group , this matrix offers a systematic approach to analyzing a company's portfolio of products or business units.

In this article, we will delve into the intricacies of the BCG Matrix, explore its components and quadrants, and discuss how it can be applied to make strategic decisions in the finance industry.

What is the BCG Matrix?

The BCG Matrix, also known as the Growth-Share Matrix, is a visual representation of a company's portfolio of products or business units . It was developed by the Boston Consulting Group in the 1970s and is widely used across industries to assess the strategic position of different offerings.

By plotting products or units on a matrix based on their market growth rate and relative market share, the BCG Matrix provides valuable insights into the potential and profitability of each element in the portfolio .

Components of the BCG Matrix

Market Growth Rate

The market growth rate refers to the rate at which a particular market is growing . It is an important factor to consider when analyzing a company's portfolio because high-growth markets tend to offer greater opportunities for expansion and profitability. By assessing the market growth rate, finance professionals can identify industries or sectors with significant growth potential and allocate resources accordingly.

Relative Market Share

Relative market share is a measure of a company's market share compared to its competitors in a specific market . It provides insights into a company's competitive position and its ability to capture a significant portion of the market. A high relative market share indicates a strong market presence, which can lead to economies of scale, pricing power, and competitive advantages.

Quadrants of the BCG Matrix

The BCG Matrix divides the portfolio into four quadrants, each representing a different strategic outlook. Let's explore each quadrant:

Stars represent products or business units with a high market growth rate and a high relative market share . These are the growth drivers of a company's portfolio. Stars require substantial investment to sustain their growth trajectory and capture the market's potential. While they generate revenue, they also consume resources to fuel their expansion. Companies should develop strategies to support and maximize the potential of stars, as they can become future cash cows.

For example Tesla's electric vehicles (EVs) in the early 2010s. With a high market growth rate and a dominant market share in the electric vehicle industry, Tesla was considered a star. The company invested heavily in expanding its manufacturing capacity and charging infrastructure to capitalize on the growing demand for EVs.

Cash cows are products or business units with a low market growth rate but a high relative market share . These offerings have reached maturity and generate significant cash flow for the company. Cash cows typically have established customer bases and enjoy economies of scale, resulting in healthy profit margins. Finance professionals should focus on sustaining and extracting value from cash cows to fund other areas of the business .

Example Microsoft's Office Suite. Although the market growth rate for office productivity software is relatively low, Microsoft's Office Suite dominates the market with a high relative market share. This product line generates substantial revenue and profit, which supports the company's investments in other emerging areas, such as cloud computing.

Question Marks (Problem Children)

Question marks, also known as problem children or wildcards, are products or business units with a high market growth rate but a low relative market share . They require careful analysis and strategic decision-making due to the uncertainty surrounding their potential. Question marks may either become stars or fail to gain market traction. Companies need to assess the viability and potential of question marks and allocate resources accordingly.

Example: Uber's food delivery service, Uber Eats, during its early years. With the rapid growth of the food delivery market, Uber Eats had a high market growth rate. However, it faced intense competition from established players like DoorDash. Uber had to strategically invest in marketing and partnerships to gain market share and compete effectively.

Dogs represent products or business units with both a low market growth rate and a low relative market share . These offerings have limited potential and may not generate substantial returns. Companies should evaluate dogs to determine if they can be revitalized or if divestment is a more appropriate course of action.

Example: BlackBerry's smartphones in the mid-2010s. With declining market share and a lack of innovation compared to competitors like Apple and Samsung, BlackBerry's smartphones became dogs in the market. The company eventually shifted its focus to software and services.

Analyzing and Applying the BCG Matrix

To conduct a BCG Matrix analysis, finance professionals should follow these steps:

Gather relevant data and information, such as market growth rates and market shares .

Plot the products or business units on the matrix based on their market growth rate and relative market share.

Interpreting the results and making strategic decisions involves:

Identifying resource allocation priorities based on the quadrant placement.

Developing growth strategies for stars and question marks.

Considering divestment or restructuring options for dogs.

Maximizing the potential and profitability of cash cows.

By applying the BCG Matrix, finance professionals can make informed decisions that optimize resource allocation, drive growth, and enhance overall portfolio performance.

Limitations and Considerations

While the BCG Matrix is a valuable tool, it has some limitations:

The matrix focuses solely on two dimensions (market growth rate and relative market share), neglecting other factors such as competitive dynamics, industry trends, and external factors.

The matrix assumes that a high market share leads to profitability, which may not always hold true.

Industries with different characteristics may require modifications to the matrix for accurate analysis.

Finance professionals should complement the BCG Matrix with other analytical tools and consider the specific context of their industry and market to gain a comprehensive understanding of their portfolio.

Case Study: Application of the BCG Matrix

Let's consider a hypothetical case study to illustrate the application of the BCG Matrix.

Company X operates in the technology industry and has a diverse portfolio of products. After conducting a BCG Matrix analysis, the company identifies the following:

Product A: High market growth rate, high relative market share (star)

Product B : Low market growth rate, high relative market share (cash cow)

Product C: High market growth rate, low relative market share (question mark)

Product D: Low market growth rate, low relative market share (dog)

Based on this analysis, Company X develops strategies to further invest in Product A to maintain its growth trajectory, sustain Product B to continue generating cash flow, evaluate potential opportunities for Product C, and consider divestment or restructuring options for Product D.

The BCG Matrix is a powerful tool for strategic analysis in finance. By analyzing a company's portfolio based on market growth rate and relative market share, finance professionals can make data-driven decisions to allocate resources effectively, identify growth opportunities, and maximize profitability.

The BCG Matrix provides a structured framework for evaluating products or business units and helps finance professionals navigate the complexities of portfolio management.

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2x2 matrices and the bcg matrix, a 2x2 matrix is an elegant instrument to effectively communicate insights.

A two-by-two matrix is a simple and effective way of  presenting  information. It is very popular in consulting because it provides a  big picture  of options that are MECE . The matrix is generally divided into  four segments , which indicate different strategic actions for each option within the respective segment. Single options are plotted into the matrix, taking  two key decision criteria   into account . The chosen two dimensions are independent  of each other. Hence, criteria need to be  carefully selected.

Use a 2x2 matrix in your interviews as a visual summary of the findings

It is recommended to use matrices (if possible) in case interviews, as it will show the interviewer that you can break down complex ideas and  communicate  these in a structured manner. A matrix is an ideal tool to  synthesize complex ideas into simple options.

As an example, imagine you need to make an investment decision

Question: In which business segments should we invest further?

Important data:

• Importance for our business (fraction of the overall revenue)
• Expected performance (Growth)

Key takeaways for a 2x2 matrix

• Scatter graph of  two variables.
• Provides an effective  overview  of where to focus first before further analysis.
• Limited  to only two variables.

The most known two-by-two matrix is the BCG matrix

The BCG matrix, also called the growth-share matrix, helps assess a company’s current product portfolio  based on the  product life cycle  and the  experience curve . Since both criteria are hard to quantify,  proxies are used  to illustrate them. The  product life cycle  is reflected by  market growth,  and  the relative market share  mirrors a company’s experience curve. Based on these two criteria,  investment or divestment decisions  can be taken for single products once they are plotted into the matrix.

• Low relative market share  in a  slow-growing  mature  market.
• Products mostly do  not generate profit  and may usually just break even.
• Divest , as these products have a negative effect on the overall  profitability  of the company.

Question Marks:

• Low relative market share  in a relatively young but  promising market (growing).
• Potential  of  becoming stars  if market share can be  increased.
• If necessary market share is not reached, likely  to turn into a poor dog , as soon as the market gets more mature.
• Careful analyses are needed to determine if to  invest or not.
• High market share  in a  slowly growing / mature  market.
• Creates the  highest cash flow.
• There is no further investment  due to limited/ no growth potential, but trying to “ milk ” as long as possible.
• High market share  in a  promising market.
• To turn a star into a future cash cow,  heavy investment  is needed to fight competition and expand market share.

Key takeaways for the BCG matrix

• Helps to  analyze  where to  invest or divest .
• Ideally, a  product should develop from a question mark to a star to a cash cow.
• IMPORTANT : This should only be referred to as BCG matrix  when interviewing with BCG , otherwise it is the  growth-share matrix .

Use the Ansoff matrix to analyze revenue growth options for a company

Besides the BCG matrix, the Ansoff matrix is one of the most known two-by-two matrices. The underlying question of this graph is how a company could achieve  future growth in terms of revenue . Here, four different strategic options are available:  market penetration ,  market development ,  product development,  or  diversification .

Market Penetration

• A Company is trying to grow within an  existing market  with  existing products.
• It can be achieved by attracting  new customers  (first buyers), which bought previously from competitors (stealing market share).
• Low risk  and  growth potential.

Market Development

• A Company is trying to grow in a  new market  with  existing products.
• New markets could be on a  regional,   national  or  international  level.
• Risk  and  growth potential  are considered to be  higher  than the ones of a market penetration strategy.

Product Development

• A Company is trying to grow within an  existing market  but with  new products.
• New products do  not need to be necessarily new , but can also be adaptions or updates to existing products developed using companies core competencies.
• Risk  and growth  potential  are  comparable  to these of a  market development strategy.

Diversification

• A Company is trying to grow in a  new market  with a  new product.
• 3 diversification strategies can be distinguished:  horizontal, concentric,  and  lateral.
• Horizontal diversification: products are often unrelated to current products, but have the potential to attract current customers.
• Concentric diversification: products often display synergies with current products and have the potential to attract new customers.
• Lateral diversification: new products have no relation or synergies with current products.
• Risk  and  growth potential  are the  highest  of all strategies.

Key takeaways for the Ansoff matrix

• Helps in answering how future  growth  should be achieved.
• 4 different strategies can be distinguished:  market penetration, market development, product development,  and  diversification.
• Each strategy has a different  growth  and  risk  potential.

Questions on This Article

What is the difference between 2by2 matrix decision making and bcg matrix, what parameters should be taken into consideration when deciding where we stand on each of the axes, can you take a typical example about horizontal ,concentric and lateral products, related cases.

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BCG Matrix: Portfolio Analysis in Corporate Strategy

BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share matrix, the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to analyse business units or product lines based on two variables: relative market share and the market growth rate. By combining these two variables into a matrix, a corporation can plot their business units accordingly and determine where to allocate extra (financial) resources, where to cash out and where to divest. The main purpose of the BCG Matrix is therefore to make investment decisions on a corporate level. Depending on how well the unit and the industry is doing, four different category labels can be attributed to each unit: Dogs, Question Marks, Cash Cows and Stars. This article will cover each of these categories and how to properly use the BCG Matrix yourself.

Figure 1: BCG Matrix

BCG Matrix Example: Samsung’s Product Portfolio

Samsung is a conglomerate consisting of multiple strategic business units (SBUs) with a diverse set of products. Samsung sells phones, cameras, TVs, microwaves, refrigerators, laundry machines, and even chemicals and insurances. This is a smart corporate strategy to have because it spreads risk among a large variety of business units. In case something might happen to the camera industry for instance, Samsung is still likely to have positive cash flows from other business units in other product categories. This helps Samsung to cope with the financial setback elsewhere. However even in a well balanced product portfolio, corporate strategists will have to make decisions on allocating money to and distributing money across all of those business units. Where do you put most of the money and where should you perhaps divest? The BCG Matrix uses Relative Market Share and the Market Growth Rate to determine that.

BCG Matrix Video Tutorial

Relative Market Share

The creator of the BCG Matrix used this variable to actually measure a company’s competitiveness . The exact measure for Relative Market Share is the focal company’s share relative to its largest competitor. So if Samsung has a 20 percent market share in the mobile phone industry and Apple (its largest competitor) has 60 percent so to speak, the ratio would be 1:3 (0.33) implying that Samsung has a relatively weak position. If Apple only had a share of 10 percent, the ratio would be 2:1 (2.0), implying that Samsung is in a relatively strong position, which might be reflected in above average profits and cash flows. The cut-off point here is 1.0, meaning that the focal company should at least have a similar market share as its largest competitor in order to have a high relative market share. The assumption in this framework is that an increase in relative market share will result in an increase in the generation of cash , since the focal company benefits from economies of scales and thus gains a cost advantage relative to its competitors.

Market Growth Rate

The second variable is the  Market Growth Rate , which is used to measure the market attractiveness . Rapidly growing markets are what organizations usually strive for, since they are promising for interesting returns on investments in the long term. The drawback however is that companies in growing markets are likely to be in need for investments in order to make growth possible. The investments are for example needed to fund marketing campaigns or to increase capacity. High or low growth rates can vary from industry to industry, but the cut-off point in general is usually chosen around 10 percent per annum. This means that if Samsung would be operating in an industry where the market is growing 12 percent a year on average, the market growth rate would be considered high.

Question Marks

Ventures or start-ups usually start off as Question Marks . Question Marks (or Problem Children) are businesses operating with a low market share in a high growth market. They have the potential to gain market share and become Stars (market leaders) eventually. If managed well, Question Marks will grow rapidly and thus consume a large amount of cash investments. If Question Marks do not succeed in becoming a market leader, they might degenerate into Dogs when market growth declines after years of cash consumption. Question marks must therefore be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

Stars  are business units with a high market share (potentially market leaders) in a fast-growing industry. Stars generate large amounts of cash due to their high relative market share but also require large investments to fight competitors and maintain their growth rate. Successfully diversified companies should always have some Stars in their portfolio in order to ensure future cash flows in the long term. Apart from the assurance that Stars give for the future, they are also very good to have for your corporate’s image.

Eventually after years of operating in the industry, market growth might decline and revenues stagnate. At this stage, your Stars are likely to transform into Cash Cows . Because they still have a large relative market share in a stagnating (mature) market, profits and cash flows are expected to be high. Because of the lower growth rate, investments needed should also be low.  Cash cows therefore typically generate cash in excess of the amount of cash needed to maintain the business. This ‘excess cash’ is supposed to be ‘milked’ from the Cash Cow for investments in other business units (Stars and Question Marks). Cash Cows ultimately bring balance and stability to a portfolio.

Business units in a slow-growth or declining market with a small relative market share are considered Dogs. These units typically break even (they neither create nor consume a large amount of cash) and generate barely enough cash to maintain the business’s market share. These businesses are therefore not so interesting for investors. Since there is still money involved in these business units that could be used in units with more potential, Dogs are likely to be divested or liquidated.

Figure 2: Cash Flows and Desired Movement in BCG Matrix

BCG Matrix and the Product Life Cycle

The BCG matrix has a strong connection with the Product Life Cycle . The Question Marks represent products or SBU’s that are in the introduction phase. This is when new products are being launched in the market. Stars are SBU’s or products in their growth phase. This is when sales are increasing at their fastest rate. Cash Cows are in the maturity phase: when sales are near their highest, but the rate of growth is slowing down due to saturation in the market. And Dogs are in the decline phase: the final stage of the cycle, when sales begin to fall.

Figure 3: BCG Matrix and Product Life Cycle

BCG Matrix In Sum

Taken all of these factors together, you can draw the ideal path to follow in the BCG Matrix, from start-up to market leader. Question Marks and Stars are supposed to be funded with investments generated by Cash Cows. And Dogs need to be divested or liquidated to free up cash with little potential and use it elsewhere. In the end, you will need a balanced portfolio of Question Marks, Stars and Cash Cows to assure positive cash flows in the future. If you want to know more about HOW to spend these investments in order to grow a business unit, you might want to read more about the Ansoff Matrix . Besides the BCG Matrix, there are other portfolio management frameworks you might want to have a look at such as the GE McKinsey Nine Box Matrix .

Further Reading:

• Henderson, B. (1970). Growth-Share Matrix. BCG Perspectives.
• https://www.bcgperspectives.com/content/articles/corporate_strategy_portfolio_management_strategic_planning_growth_share_matrix_bcg_classics_revisited/
• https://www.bcg.com/publications/1970/strategy-the-product-portfolio.aspx

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10 thoughts on “ BCG Matrix: Portfolio Analysis in Corporate Strategy ”

Simple, easy to follow and moreover Clear and Perfect presentation Sir.

impressing thank you so much……well articulated easily understandable tutorial/lecture.

Thank you, all the videos have helped me with my studies and progress in my MBA

Great videos, really helps

Great video it was really easy to follow!!

From ILOVEADIAN

This is a great video. Explained BCG matrix succinctly

Fantastic breakdown of the BCG matrix. greatly simplified!

What a powerful presantation of the BCG Matrix. You are simply the best.

Great website. It helps to add further clarity and more context to my textbook.

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Coca Cola BCG Matrix Analysis

1. Introduction

The Boston Consulting Group (BCG) growth-share matrix is a business planning tool that helps a business prioritize its products by investment and ROI. For example, the BCG matrix of coca-cola plots its products in a four-quadrant matrix in which the y-axis shows the market growth rate and the x-axis depicts the market share. BCG matrix is also called the growth-share matrix.

2. Background of Coca Cola

Coca-Cola is a large-scale beverage company operating for more than a century. It all started on May 8, 1886, when Dr. John Pemberton sold the Coca-Cola drink at Jacobs' Pharmacy in downtown Atlanta. Coca Cola has grown from a small firm to a multinational company with a global presence from this humble beginning. The company has shown sustained growth based on its consistent quality and brands

3. Coca Cola BCG Matrix

The BCG Matrix of Coca-Cola shows different products in four quadrants named the Dogs, Stars, Cash Cows, and the Question Mark. In the BCG Matrix of Coca-Cola , we will analyze its slow growth products, high selling products, high growth products, and high predictive selling and low growth products.

A company's products with low growth and market share and no promising growth chances are called dogs. Management usually does not show any interest in these products and doesn't invest here because of low chances of profit or benefits.

In the BCG matrix of Coca-Cola, we can see that Coke is a potential dog product because of the declining demand for carbonated soft drinks in favor of increasing demand for healthier options or low-calorie drinks. If these factors keep increasing, Coke, a cash cow, can become a low market share product.

The products or business units with a high market share in a high-growth industry are the stars of the business. In the BCG matrix of Coca-Cola, the bottled water segment is categorized as star products. Coca-Cola offers two bottled water brands, namely Kinley and Dasani, operating in separate geographical locations. Kinley is offered in European markets, while Dasani is popular in the US. As the market for healthy drinks and bottled water is expanding, this segment of Coca-Cola is expected to gain a bigger market share and a better opportunity for further investment.

This is why Coca-Cola is investing in more brands like sparkling water and flavored water.

3.3. Cash Cows

Cash cows are products that have low growth markets but high market share. They have a high market share in the industry, and the forecasts suggest low chances of significant growth in the future. However, these products bring maximum revenue with very low investment to sustain profitability.

In the BCG matrix of Coca-Cola, we can see that Coke has been the market leader in the carbonated soft drink industry and a significant revenue generator for the company. It has a global presence and has been an established brand for years, making Coke a cash cow for the Coca-Cola company.

3.4. Question Marks

Question marks are the products that are still in the development stage, and the market's response to these products is still not very well established. These products initially achieved a small market share, but the investment decision is still risky. So, these products can either turn into stars or cash cows.

In the BCG matrix of Coca-Cola, we can see that they are launching many new brands and lines of products, including Diet Coke. Smartwater, Honest Tea, Sparkling Water, Minute Maid. These products are geared towards growing healthy non-carbonated drinks and healthy lifestyles. Coca-Cola is also investing in new products and raising awareness about these products. These products are question marks for the company.

4. Limitations of BCG Matrix

BCG is a very simple method to assess the position of different brands and products in the market to see where to invest more finances and where there are no chances of growth. However, this over simplicity is a cause of reservation because experts believe many other factors determine the market reaction to any product, e.g., geographical demographics, brand power, competition, etc. So, a decision based on only the BCG matrix is very risky.

It is also observed that the BCG matrix was originally developed for different manufacturing and production units owned by one business group. So, translating this model for different products is out of context. For example, when we use the BCG matrix of Coca-Cola for Coke, Kinley, and Dasani, this is not the proper usage of this model.

Another limitation of the BCG matrix is that it does not consider the gray areas or medium growth and medium market share areas in the real world.

5. Key Takeaways

BCG matrix is a business planning tool that helps companies assess the investment options and the growth potential of their products based on market share and growth predictions. In the Coca-Cola BCG matrix , we can see that Coke is a cash cow but is turning into a dog while the bottled water and healthy lifestyle products are the question marks.

A comprehensive drawing software such as EdrawMax is better for drawing BCG matrices because of the exclusive symbols, clipart, and great tools and layout options. The best thing about EdrawMax is the well-stocked template library that gives you a quick start with professionally designed samples for business planning and analysis diagrams. Find more business diagram templates .

6. References

Reading the BCG Growth-Share Matrix. (n.d.). Investopedia. Available at: https://www.investopedia.com/terms/b/bcg.asp (Accessed March 14, 2022).

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BCG Matrix (2024): Meaning and Example [+ Template]

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Gust de Backer

November 3, 2023, 10 reacties.

The BCG Matrix also known as the Boston Consulting Group Growth-Share Matrix is a strategic marketing model for assessing product lines for relative market growth and sales volume.

Do you have several products or services that you want to know what their performance is relative to each other and what’s left in terms of market?

Instead of guessing which products to focus on, you can map them out in an orderly fashion and decide which product lines are better stopped and which are worth investing in.

I’m going to show you:

• What the BCG Matrix is
• How to fill in the BCG Matrix
• What you ultimately do with the results of the BCG Matrix

Let’s get started

Table of Contents

What is the BCG Matrix?

The BCG Matrix is a strategic marketing model invented by the Boston Consulting Group .

Companies use the BCG Matrix (portfolio analysis) to compare different products or services against each other to determine whether companies should:

• Continue producing
• Stop producing
• Or invest in it

The BCG Matrix helps companies allocate resources in a way that maximizes the following:

• Market share and market growth
• Company growth
• Long-term profitability for each product line

By understanding where products fall in the BCG Matrix, companies can more effectively determine how to allocate resources.

Four quadrants of the BCG Matrix

The BCG Matrix has four quadrants into which products can fall:

In this, it is notable that you often see that products have a certain Product Lifecycle :

1. Question Marks – Construction

Low market share and high market growth.

The “Question Marks” are a product group in which there is a low market share, but where the market is actually showing high growth.

These products are not necessarily very profitable at this time, but have potential to gain market share with the right investments .

It is therefore possible to build a ‘Question Mark’ into a ‘Star’.

If you introduce a new smartwatch to the market, it will be difficult to gain ground, despite the fact that the market is growing rapidly.

This is because large companies already have strong differentiation combined with large market budgets.

2. Stars – Holding

High market share and high market growth.

The ‘Stars’ are a product group with a high market share and a fast growing market.

These products are profitable and it is worthwhile to continue investing in this product group so that they at least maintain their market share and perhaps even continue to grow.

The Apple Smartwatch is an example of a product where Apple has a high market share and the smartwatch market is experiencing strong growth.

3. Cash Cows – Harvesting

High market share and low market growth.

The ‘Cash Cows’ are a product group with a high market share and a market with hardly any growth.

These products are already profitable with little growth potential in the market. The desired strategy here is to invest as little as possible and still maintain the market position.

The revenue generated from a Cash Cow can be invested in Stars or Question Marks.

Rocket ice creams are an example of OLA, a market with relatively low growth where OLA has a large market share.

The money OLA earns from its rocket ice creams they can invest in, for example, alcoholic ice creams in which there is still a lot of market potential.

4. Dogs – Divestment

Low market share and low market growth.

The Dogs are a product group with a low market share and a market that will hardly grow.

These products are loss-making and have no potential to become profitable.

You want to stop investing in a ‘Dog’, because there is nothing more to be gained from it.

Suppose that a new pharmaceutical company starts developing a corona vaccine in 2023, they will find themselves in a market in which they have virtually no market share and there is no market growth to gain that share.

Points of criticism of the BCG Matrix

Besides being a good model for mapping the (potential) performance of your various product lines, the BCG Matrix also has some criticisms:

• Market share does not guarantee profitability.
• Market growth can be influenced by the company (by boosting).
• The matrix leaves out competition.
• Some products are very interdependent in practice.
• Declining / collapsing markets are not taken into account.
• Both axes are assigned the same prioritization, in practice this need not be so and depends on the business strategy.

The model is easy to use, but needs context to ultimately base decisions on it.

BCG Matrix example

Download the BCG Matrix here:

Good choice! Check your e-mail for the resources...

How do you complete the BCG Matrix?

Start by identifying your own products or services. Which products do you want to include in the portfolio analysis?

To determine your own market share and the market share of your biggest competitor you will need to know how big the total market is.

Based on the size of the total market, calculate your own market share.

Based on the total size of the market, calculate the market share of your competitor so that the relative market share can be calculated.

Determine how much the market is going to grow in the coming period.

To fill in the size of the circles you need to indicate how much sales you do per product category.

Taking Apple as an example…

If we enter that into the BCG Matrix we get the following visualization:

Getting started…

If all goes well, you are now armed with enough knowledge to formulate your portfolio strategy….

Now I want to know from you, what do you think is the most effective method of measuring product performance?

Let me know in a comment.

P.S. should you want additional help please let me know at [email protected]

Frequently Asked Questions

The BCG Matrix, also known as the Boston Consulting Group Growth-Share Matrix, is a model that helps organizations analyze their product portfolios and make resource allocation decisions. The matrix plots strategic business units (SBUs) on a graph to help organizations assess their competitive position in the marketplace and identify potential opportunities.

A BCG portfolio analysis is a way to measure how well a company is performing by looking at its various activities and products. It can help a company decide where to invest its money and which products to stop with.

Market growth is calculated by determining the percentage increase in sales from one year to the next. This figure is then multiplied by the total value of sales from the previous year to determine the market value.

A cash cow is a product or service that generates a large amount of stable, ongoing revenue. A cash cow is usually not the most innovative product or service, but it is reliable and profitable.

The BCG matrix is a strategic marketing model used to help a company decide where to allocate its resources. The matrix is divided into four quadrants: -Stars: high market share and high growth -Questrels: high market share but low growth -Cash Cows: low market share but high growth -Dogs: low market share and low growth. An example of how the BCG matrix can be used would be two companies competing in the same industry. Company A has a large market share but is not growing as fast as Company B. Company B has a small market share but is growing fast. In this case, Company A is considered a cash cow and Company B is considered a star.

I try to help business surpass their growth ceiling with my content.

Sounds interesting?

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BCG Matrix | Business Strategy | Customer Development Process | Market Research | Marketing and Sales | Marketing Strategy | Product-market Fit | Value Proposition Canvas

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• Value Proposition
• Brainstorming
• Decision Making Unit
• Product-Market Fit
• North Star Metric
• Market Research
• Customer Development
• Growth Hacking
• Brand Identity
• Customer Journey
• Account-Based Marketing

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10 Comments

This is very good explanation. May Allah increase your knowledge.

Thank you, Kiran!

the example given by your explanation is wrong as you have mentioned as the company A would become the question or questol and the Company B shall become the cash cow

Thank you for the comment! I have adjusted it.

Cash Cows are units with high market share and low market growth, not the other way round.

Thanks for the comment Babatola! Where do you see this mistake?

I really find this helpful

Thank you, Alinafe!

Thank for helping me ,I have really understood the matrix

Thank you, Deborah!

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What is the BCG Matrix? Definition, Example, Template and Guide

How to use the bcg matrix model for your organization or business.

The ‘Boston Consulting group’s ‘abbreviation is the BCG matrix. This BCG matrix is designed to help long-term strategic planning for the benefit of the business and its growth opportunities by means of a review of its product portfolio to decide on the most suitable investment to obtain maximum Return on Investment. This also determines about discontinuing as well as developing products. It is also named the Growth Share Matrix.

How Do You Prepare a BCG Matrix?

BCG matrix is prepared by executing the following steps:

Step 1: Selection of the Product:

BCG matrix is utilised for this purpose by:

• Analysis of Business Units,
• Separation of brands, products or considering an organisation as a unit

Step 2: By defining and market study

Step 3: By comparison and by calculation of the relative market share

Step 4: a study of the market growth rate.

Step 5:  Draw the circles on a matrix.

What Are the Four Categories of BCG MATRIX?

It is primarily based on planning in a portfolio-dependent study and observation. So, a company’s business units can be classified into four categories:

• Question Marks

It is necessary to conceptualise better the above four processes related to the BCG matrix by making one for L’Oréal in the following sections.

How Do You Find a BCG MATRIX?

By following the steps indicated below, you can find a BCG matrix.

Step 1: Induction of BCG Matrix.

Step 2: Reach the Ribbon > Insert > Other Charts and click Bubble Chart.

Step 3: Change X-axis values.

Step 4: Click Edit to change the source of data.

Step 5: Change series X values.

Step 6: Selection of Relative Market Share values.

Step 7: Your BCG Matrix chart is a bit changed.

How to Find Market Growth Rate?

The growth rate of industries can be easily estimated using free online resources. Alternatively, it can be calculated by counting the reputed companies’ average growth rate of revenue. Usually, the Market growth rate is represented in percentage terms.

The market growth rate is usually estimated by the formula stated below:

(Product’s sales in the current year – Product’s sales of the previous year)/Product sales last year

High growth-rated markets are the ones where the total market share gained is expanding; this results in many advantages for all companies in gaining monetary profit.

Step 5: Drawing the Circles over a Matrix

After the above calculation, it needs only to plot the brands on the matrix. The x-axis represents or shows the relative market share, and the y-axis indicates the company’s growth rate. A similar circle can be plotted for each unit, brand, and Product, and the size of which must correspond ideally to the company’s revenue.

What do the Question Marks Signify In the BCG Matrix?

The feature of question marks represents a business to have high growth prospects but a low share in the market. They consume a significant amount of cash but with little return. Ultimately, ‘question marks ‘lose money. However, as these business units increase, they have the potentiality to upgrade into stars by entering a higher growth-oriented market.

How to Use a BCG Matrix?

After defining four categories of the BCG market, we can review the strategies of the company by using   each category as discussed below:

Stars: The location  of the products in this quadrant is highly attractive as they are located in a robust category, and these products are highly competitive. A huge potential has been found in this category for high revenue growth. This is due to its high market share and high growth rate. It is expensive to develop but is worth investment for promotion to the long extent of its Product Life Cycle. In the event of its success, a star may be a cash cow in the event of maturity, assuming they keep the same market share unchanged.

Strategic Choices, As Indicated Below:

• Vertical Integration,
• Horizontal Integration,
• Market Penetration,
• Market Development, And
• Product Development

Question Marks:  Most businesses start as question marks. Huge investments are necessary to achieve or protect market share. The question mark sector has the potential to become stars category and ultimately c ash cows but can also become dogs or exits. It requires high Investments for question marks; otherwise, this categor y may result in negative cash flow.

Like stars, the category of Question also does not always succeed; if, after a large investment, they cannot fetch profit and gain market share, they become the dog category. Therefore, careful observation and review are necessary before investing in this category.

Strategic Choices Are The Follows:

• Market Development,
• Product Development,
• Process of Investment.

Cash Cows:  In this category, cash generates profits by investing as little cash as possible. It needs low-cost support and needs to be managed for continued profits & cash flow. Large corporate or SBUs are considered efficient and innovative and should have the potential to become stars. It requires maintaining a healthy market status and should defend the market share of the business house or investors. The company should take advantage of sales volume and leverage the size of its operations. It can support other businesses too.

Strategic Choices: Product Development, Diversification

Dogs:  Low market share makes it a face of cost disadvantages, so they need enough cash to reach break-even, but they are rarely, if ever, worth investing. This Dog sector should be liquidated if there are fewer prospects for gaining market share. This is at a declining stage of the Product Life Cycle, requiring a minimum number of dogs in the company.

Advantages of BCG Matrix

• It is simple and easily understood.
• It can quickly and merely show the opportunities open to you,
• This can identify how corporate cash resources can be invested suitably to maximize a company’s growth and profitability.
• BCG Matrix can prepare a framework for allocating resources among different products

Limitations of BCG Matrix

This type of matrix has two-dimensional applications as given below:

• Relative market share and
• Market growth rate

Limitations are indicated below:

• BCG matrix is not the only indicator of the profitability of a business, attractiveness or success.
• It does not care for the effects of synergy from brand to brand.
• A company which has a minimum market share can become profitable as well.
• It has been observed that a High market share does not always produce high profits since there is also a high cost in obtaining a high market share.
• It has been observed that dogs may benefit the business or other products in achieving and gaining a competitive advantage.
• It does not care for small competitors with a fast-growing market share component.

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• Using the BCG Matrix

BCG Matrix, strategy, capabilities, growth options

Review the activity below or download the PDF student worksheet

• Student Worksheet: Using the BCG Matrix
• Instructor Solutions (Members Only):  Using the BCG Matrix = Solutions

Student Discussion Activity

Introduction

In the following mini-case study, you are required to categorize the corporation’s business portfolio into the four boxes of the BCG (Boston Consulting Group) model. You then need to decide how the management should allocate $250 million funds available across their strategic business units (SBUs), using the BCG matrix as your guide.

Mini-case Study

The AHI Group is a hypothetical diversified firm operating in Australia. Created less than 20 years ago, AHI has clear goals of strong growth and achieving dominance in all the markets that it chooses to compete in. The corporation now has four SBU’s, as follows:

• A chain of fast food restaurants (General Manager = Clive)
• A manufacturer of smart TVs  (General Manager = Kristi)
• A ‘branding’ marketing consulting firm (General Manager = Therese)
• A bus travel company (General Manager = Jamie)

It is strategic planning time at AHI and each of the General Managers are outlining their resource requirements with the founders.  ( Note : There is $250m available to reinvest into the business.)

The following are some excerpts from the minutes of the meeting:

Clive: “My fast-food division is the only one that is making any real profits – over $500m last year. It’s clearly obvious that we need to reinvest in THIS business. Let’s expand and grow the profits. As usual, we’re facing significant challenges from new competitors, so we really need the investment.”

Kristi: “That’s fine, but you’ve got limited growth potential. OK, we’re not making much money now, but this market is too big to not pursue it properly. So we need the $250m to help catch up to the leaders, as they’ve got a big start. That way we can generate potential huge future profits.”

Therese: “Kristi, you’re too far behind the market leaders. I don’t see the sense in throwing money into something where we will probably end up in a weak position anyway. Whereas our branding marketing consulting business is growing really well. We’re consulting throughout the world and are considered to be one of the market leaders with our innovative practices. Sure, we’ve got lots of infrastructure costs, but this is going to be a future goldmine. We’ll make more than the fast food chain in five years time.”

Jamie: “We’re in a tough market that’s pretty flat at the moment. I know we only make a few million dollars a year, which is small time for the rest of you. But it’s a big market, and we could use the investment to somehow improve our position.”

Student Discussion Questions

• How would you classify each of AHI’s business portfolios using the BCG matrix?
• How would you allocate the $250m investment across the SBUs?
• How useful did you find the BCG matrix in helping allocate the $250m investment?
• Are there circumstances where the BCG matrix could be misleading (that is, suggest an investment in a low potential SBU for instance)?

Related Activities

• Analyzing the BCG matrix
• Trends in the BCG matrix
• GE-McKinsey Multi-Factor Excel Template (Teaching Tips and Ideas)
• Using Gantt Charts: Teaching Tips

Case Interview Preparation

Perform at your best during your case interview., bcgers share their case study interview tips., follow these dos and don ’ ts to ace your case prep:, test your case interview skills with these interactive quizzes., set out a climate strategy for a client., restore client satisfaction at a digital bank..

• To overcome the critical threat to their water supply, communities around the world must rethink their approach to water.
• We need to fulfill the human right to water through a combination of artificial “gray infrastructure” and nature-based “green infrastructure,” in tandem with stronger local governance.
• To pinpoint the water risks that regions face, BCG and WWF have developed tools that take into account environmental, economic, and social dimensions of the challenge.

Subscribe to our Climate Change and Sustainability E-Alert.

Climate Change and Sustainability

/ report, navigating the waters: strategic solutions for water resilience.

By  Torsten Kurth ,  Dean Muruven ,  Jester Koldijk ,  John Staunton Sykes , and  Adam Wlostowski

With major contributions from Stuart Orr and Richard Lee of the WWF Freshwater Practice Coordination Team and from the WWF Water Risk Filter team

The world is facing a pervasive—and mounting—water crisis. Communities have too little water, or at times too much, or the water isn’t clean. Already under pressure, the ecosystems and infrastructure that sustain water resources are now vulnerable to disruptions from climate change , resulting in significant economic impacts that place business at risk.

Although access to freshwater has improved over time and businesses have become better at managing water risk, climate change is threatening to halt or reverse this progress. Governments cannot fix the problem alone; they must work with the private sector and nonprofit groups to promote and adopt a holistic approach to water management-one that prioritizes resilience. Fortunately, new ideas and emerging technologies can help us overcome these challenges and unlock opportunities arising from the water crisis.

The Global Water Crisis

Before describing those solutions, we need to dispel some common myths about the water crisis. Although they have some parallels, the water crisis is quite different from the crisis in carbon emissions—especially in that water issues are hyperlocal. Nor can we depend on governments alone to provide resilient water supplies, which have become so fragile that they require the involvement of diverse stakeholders. Crucial innovations must come from both for-profit and nonprofit organizations in each region.

A secure water supply is not simply a financial or engineering challenge, so there is no easy infrastructure fix to the crisis. Because water depends on natural ecosystems, solutions must work with nature on the ground. Even with the engineering approach of the past century, more than a million people die each year because they lack access to safe and affordable drinking water, adequate sanitation, and suitable hygiene facilities. As population growth, rising economic output, and changing climate patterns increase pressure on freshwater supplies, the progress made in recent decades is under threat and could be reversed. Instead of doing more of the same, we need to take a new approach.

In doing so, however, we should not make water free for everyone. Water pricing involves a complex balance between equity and efficiency: water should be inexpensive because it is a human right, but people should also have an incentive to conserve it. As for investors, they often lack the information needed to support sustainable water projects and companies.

Today the world faces severe water problems in many regions. We have not managed water sustainably and equitably—and now four drivers are raising the stakes:

• Changing climates are disrupting freshwater supplies.
• Demand is increasing unsustainably.
• Infrastructure is not keeping up.
• Freshwater ecosystems are degrading.

Behind all of these drivers is failed governance. Many regions lack the governmental capacity to manage freshwater resources effectively. They send out weak pricing signals, rely on outdated allocations, and in many cases do not consider the ecosystem's wider ecology and hydrology. Effectively managing water use requires strong, impartial, and collaborative local governance.

Gaining a thorough understanding of the water crisis in any region or location is difficult because many factors are involved. To reduce the complexity, BCG’s Water Impact Matrix charts each region’s degree of crisis according to two factors. The first factor assesses indicators of too little water, too much water, and too dirty water. The second takes into account environmental, economic, and social dimensions. Policymakers can use the Water Impact Matrix in combination with WWF’s Water Risk Filter, which quantifies risks on the basis of indicators from 32 global data sets. Together, these tools show that 4% of the world’s environmentally rich areas, 30% of global GDP, and 34% of the world’s population are in locations at high water risk. By 2050, if we continue business as usual, 7% of environmentally rich areas, 43% of the global GDP, and 51% of the global population will be at high risk.

Among the regions at high risk are northern India, northeastern China, the southwestern U.S., and the Mediterranean. These regions must develop sustainable water management solutions to meet the needs of social and economic growth as part of their long-term sustainable development plans. (The full report includes a case study examining how the southwestern U.S. has employed four of six key strategic shifts to address its water crisis.)

With regard to industrial sectors, water is especially critical to the operation, profitability, and sustainability of agriculture, textiles, mining, and energy production—and all of these sectors are stressing local water supplies. The report includes details on the virtual water trade and the implications of a major shift to hydrogen energy.

Resilient Solutions for a Sustainable Future

People have traditionally used, valued, and governed freshwater as an inexhaustible commodity. To boost access to water through adoption of climate-resilient systems, we need a long-term systems-level approach that includes working effectively with natural processes such as groundwater and aquifer recharge. We propose six strategic shifts in water management for the public and private sectors:  

• Foster and accelerate technological and social innovations.
• Anchor corporate strategy and decisions to the water crisis.
• Expand nature-based solutions to manage and restore ecosystems.
• Enhance valuation, pricing, and water allocation.
• Improve water financing frameworks.
• Develop a local foundation of governance and regulatory enforcement.

The report looks closely at technological and social advances, and includes sidebars on precision irrigation and social innovation.

Armed with better monitoring and data, decision makers can move toward evidence-based water management, rather than simply favoring the loudest or best-connected interest groups.

The global water crisis crept up gradually, as people around the world built economies and societies that took access to freshwater for granted. Today, we can clearly see the cascading harms that arise from too much water, too little water, or too dirty water. With thoughtful, informed investments and policy shifts that encourage building in—rather than building over—natural ecosystem services, we can better prepare ourselves for expected water constraints in much of the world.

Above all, we need to work collaboratively to address the complexity of the water crisis. Governments, financial institutions , nonprofit organizations, and corporations must work together in supportive, inclusive conditions to build resilient water systems that deliver on water as a human right, facilitate economic growth, and overcome the challenges of climate change.

Managing Director & Senior Partner

Associate Director

Johannesburg

Cambridge Advanced Degree Recruiting Lead

Senior Data Scientist

ABOUT BOSTON CONSULTING GROUP

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.

Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

© Boston Consulting Group 2024. All rights reserved.

For information or permission to reprint, please contact BCG at [email protected] . To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com . Follow Boston Consulting Group on Facebook and X (formerly Twitter) .

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