Strategy
BCG matrix
The Boston Consulting Group designed the ‘BCG matrix’ in the 1970s.
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BCG matrix vs The BCG growth-share matrix
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Strategy
The BCG growth-share matrix
Most firms operate in more than one line of business.
Read articleChoice logic
Use this when.
Use the BCG matrix to compare the growth and profit potential of business units or products. Classifying each position supports a choice to build, hold, harvest or divest and helps management shape the overall portfolio into a financially sustainable mix.
Describe the composition of a diversified company.
Extracted signals
Strengths, limits, and pitfalls.
BCG matrix
- Define the market, the comparison competitor and the growth threshold before plotting products. Consistent boundaries make the portfolio discussion more credible and less vulnerable to internal bias.
- First, estimate the expected market growth rate for every product or service in scope. Then calculate relative market share, normally by comparing the product’s share with that of the largest competitor. Plot each offer against the two axes using a consistent set of thresholds.
- Stars hold a high relative share in a rapidly growing market. They may already be profitable but usually need continued investment to defend and extend their position.
Watch for
- Do not infer that a question mark deserves investment simply because its market is growing. Capital creates value only when the business has a credible route to advantage, share and attractive returns.
The BCG growth-share matrix
- Use the matrix as an initial portfolio picture, then test market attractiveness, business strength, synergies and market boundaries with deeper evidence.
- Define each market carefully, calculate the growth and relative share measures, then plot all businesses with bubble size representing a useful third variable such as revenue or capital employed. This visual overview was especially valuable for conglomerates holding 50 or more businesses.
- The classic cash flow logic moves surplus from cash cows to promising question marks, which may gain share and become stars; mature stars later become cash cows and finance the next generation. Dogs are harvested, sold or selectively repaired.
Watch for
- Labels can become self fulfilling. Starving a mature business of sensible reinvestment may cause the decline the ‘cash cow’ classification predicted.
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Related templates.
Benefits Realization ReportBenefits Realization Report Purpose. Use this report to show which programme benefits were realised during a defined period, which expected benefits were delayed or missed, and which new benefits have emerged. Each entry should trace to the business case and benefits-realisation plan so decision-makers can distinguish delivered value from completed activity. Application. Benefits become meaningfulInterface Management PlanInterface Management Plan Purpose. Use this plan to identify and manage the organisational, technical, interpersonal, logistical and political interfaces within the programme, across its portfolio and with external parties. It turns interrelationships and interdependencies into named controls, owners and risks rather than leaving them between component boundaries. Application. Develop the plan earKnowledge Management PlanKnowledge Management Plan Purpose. Use this plan to connect programme participants with useful knowledge, subject-matter expertise and the information created across components. Effective knowledge management reduces reinvention and duplicate work, helps people find proven answers quickly and reserves scarce expert attention for problems that genuinely require new thinking. Application. Prepare thProcurement Management PlanProcurement Management Plan Purpose. Use this plan to decide what the programme should obtain externally and how each acquisition will move from need to an awarded agreement. It covers facilities, goods, materials and external resources, together with the sourcing, solicitation, evaluation and contractual methods appropriate to each requirement. Application. Prepare the plan early because procurem