The growth/share matrix (BCG)

BCG’s matrix classifies a segment by market growth and relative market share. A low-share position in a slow-growing market becomes the memorable but potentially prejudicial category called a ‘dog’.

When to use it

• Use it as a portfolio lens alongside the Attractiveness/Advantage Matrix. If the models disagree, investigate the assumptions rather than choosing the answer you prefer.

Origins

Boston Consulting Group introduced the Growth/Share Matrix during the late nineteen-sixties as a measurable way to compare business units and product-market segments. Its animal vocabulary helped the framework endure.

The crucial innovation was relative market share. A 20 per cent share looks strong when the nearest rival has 10 per cent, but weak when the leader has 40 per cent. Those situations produce relative shares of 2.0× and 0.5× respectively, with different implications for cost and competitive advantage.

What it is

The objective resembles the Attractiveness/Advantage Matrix: compare the strategic position of businesses or segments. BCG replaces a multi-factor attractiveness score with forecast market-demand growth, and replaces a multi-factor strength score with relative market share. The result is more measurable and transparent, but also narrower.

How to use it

Construct a 2 × 2 matrix.

Place relative market share on the horizontal axis. Divide the segment’s share by the share of its leading competitor rather than using absolute share alone. A 20 per cent share against a 10 per cent rival yields 2.0×; the same share against a 40 per cent leader yields 0.5×.

Place market growth on the vertical axis, using a forecast annual real growth rate over the next several years. Plot each segment and classify it:

• Stars: high share in a fast-growing market.
• Cash cows: high share in a slow-growing market.
• Question marks: low share in a fast-growing market.
• Dogs: low share in a slow-growing market.

The Growth/Share Matrix: an example

Colour key

Current segment

New segment

Note: The horizontal axis is often inverted, with high relative share on the left. The version shown runs from low to high so it aligns visually with the Attractiveness/Advantage Matrix.

The classic recommendation is to invest in stars, harvest cash cows, divest dogs and evaluate question marks selectively. In the shared example, that suggests milking A, holding or investing in borderline cash cow/star C, investing in star D, examining entry into borderline question mark/star E, and harvesting or exiting dog B.

Treat the labels as hypotheses. Growth is only a proxy for attractiveness, relative share only a proxy for advantage, and both depend on the market boundary. Compare the output with richer industry and capability analysis before reallocating capital.

Top practical tip

Draw the 2 × 2 matrix with explicit market definitions, forecast growth and relative-share calculations, then test the conclusion with a multi-factor portfolio view.

Top pitfall

A different market boundary can move a segment to another quadrant. Do not turn a proxy and a label into an automatic investment decision.

Further reading

Henderson, B.D. (nineteen seventy) “The Product Portfolio.” Boston Consulting Group.

Boston Consulting Group (no date) “What Is the Growth Share Matrix?”