BCG Matrix Model
Tuesday, October 14, 2008 6:08
In marketing, the BCG matrix or BCG model is one of the most famous portfolio management tools used in product life cycle theory. This portfolio planning model was developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s.
BCG model is often adopted to prioritize the funding and attention to various products in company product mix. It helps classify the products or service and company business units into four categories, based on combinations of market growth and market share relative to the largest competitor.
1. Stars
As the Stars in BCG Matrix have high market share in a growing market, they are the leaders in the business but still need a lot of support for promotion a placement.
If market share is kept, Stars are likely to grow into cash cows.
2. Question Marks
Products or service of this kind are in the position of the growing markets but they have low market share.
Usually, Question Marks essentially refer to new products that customers have yet to discover. According marketing strategy for this kind of products or services is to get the markets to adopt them. Due to the low market share, the Question Marks in BCG Matrix have high demands and low returns. These products need to increase their market share quickly or they become dogs.
The best approach to handle Question Marks is to either invest heavily in them to gain market share or to sell them.
3. Cash Cows
Cash cows are in a position of high market share in a mature market. If competitive advantage can be achieved, cash cows have high profit margins and generate a lot of cash flow.
As a result of the low growth, promotion and placement investments are low. Investments into supporting infrastructure can improve efficiency and increase cash flow more. Cash cows are the products that various kinds of businesses are striving for.
4. Dogs
In BCG model, Dogs are defined by being in the low growth markets and having low market share. They should be avoided and minimized, as usually even expensive turn-around plans won’t help much.
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