What Is the BCG Growth Share Matrix?

What Is the BCG Growth Share Matrix?

Let me tell you about the BCG Growth Share Matrix—it's a planning tool from the Boston Consulting Group that uses a graphical setup to represent your company's products and services, helping you decide what to keep, invest more in, or sell off.

You plot your company's offerings on a four-square matrix where the y-axis shows the rate of market growth and the x-axis shows market share.

This matrix was introduced by the Boston Consulting Group back in 1970.

Key Takeaways

The BCG Growth Share Matrix categorizes your company's products into four quadrants: stars, cash cows, question marks, and dogs, all based on market growth and market share.

Stars are those high-growth, high-share products that need investment to hold onto their market leadership, but they can turn into cash cows when growth slows down.

Cash cows sit in low-growth areas with high share, generating steady cash flow that supports other parts of your business.

Question marks are in high-growth markets but with low market share, so you need to analyze them closely to see their future potential.

Dogs are low-growth, low-share products that might need to be divested or repositioned to free up your resources.

How the BCG Growth Share Matrix Analyzes Business Units

The BCG growth share matrix breaks down your products into four categories: dogs, cash cows, stars, and question marks, each with its own unique characteristics.

Dogs (or Pets)

A product gets classified as a 'dog' if it has low market share and low growth rate—you should consider selling, liquidating, or repositioning these.

Dogs appear in the bottom right quadrant and generate little cash because of their low market share and growth; they can trap your funds over long periods, making them prime candidates for divestiture.

Cash Cows

Products with low growth but high market share are 'cash cows'—you should leverage them for steady cash flow as long as possible.

Cash cows are in the bottom left quadrant, usually leading in mature markets; they often generate returns higher than the market’s growth rate and sustain themselves from a cash flow perspective.

These products have predictable cash flows, making them easy to value—use their cash to invest in high-potential stars.

Stars

Products in high-growth markets with significant market share are 'stars' and should be invested in—they're in the top left quadrant.

Stars generate high income but also consume large amounts of your company's cash; if they remain market leaders, they eventually become cash cows when the market’s overall growth rate declines.

Question Marks

'Question marks' are opportunities in high-growth markets where your company lacks large market share—they appear in the top right quadrant.

Question marks typically grow fast but consume large amounts of your company resources; you should analyze products in this quadrant frequently and closely to see if they’re worth maintaining.

Recognizing the Limitations of the BCG Matrix

The matrix helps in decision-making, but it doesn't consider all business factors—gaining market share might cost more than the extra revenue from new sales, and product development can take years, so you need careful contingency planning.

The matrix classifies businesses as either low or high, excluding midsize companies; since midsize companies often make up a large market share, excluding them may not truly reflect the business climate.

The BCG matrix assumes that all businesses operate independently of each other, but that isn’t always true—certain players in the market, such as dogs, can end up giving others a boost, sometimes unintentionally.

Remember, the matrix is not a predictive tool; it takes into account neither new, disruptive products entering the market nor rapid shifts in consumer demand.

Real-World Application: Apple's BCG Growth Share Matrix Example

The growth matrix applies to many real-world companies, like Apple—let’s examine Apple’s products by matrix category: Star: iPhone; Cash cow: Macbook; Question mark: Apple TV; Dog: iPad.

The company earned $383.28 billion in net sales in 2023, with almost $298.1 billion from its products section and the remaining $85.2 billion from services.

The majority of Apple’s sales come from its most popular product, the iPhone, which brought in $200.58 billion in sales for the year—it’s considered the company’s star.

The cash cow for the company is its Mac products, notably the Macbook laptop, with sales at $29.36 billion for the fiscal year.

One of the question marks for Apple is its Apple TV streaming service, falling under the Services category; competition is intense with players like Netflix, Hulu, Disney+, YouTube, and Vimeo, and Apple’s Services division earned $85.2 billion in 2023.

Once a darling of the company, the iPad has become a dog—Apple’s tablet shows low growth as sales decline, coming in at $28.3 billion in 2023 compared to $29.29 billion in 2022.

What Are the 4 Quadrants of the BCG Matrix?

The BCG growth share matrix uses a 2×2 grid with growth on one axis and market share on the other—each of the four quadrants represents a specific combination of relative market share and growth.

For low growth, high share: You should milk these cash cows for cash to reinvest elsewhere.

For high growth, high share: You should significantly invest in these stars because they have high future potential.

For high growth, low share: You should invest in or discard these question marks, depending on their chances of becoming stars.

For low share, low growth: You should liquidate, divest, or reposition these pets.

How Does the BCG Matrix Work?

The BCG growth share matrix considers your company’s growth prospects and available market share by assigning each business to one of these four categories—executives can then decide where to focus resources and capital to generate the most value, as well as where to cut losses.

Is the BCG Matrix Used in the Real World?

The growth share matrix was used by about half of all Fortune 500 companies at the height of its success, according to BCG—it’s still central in business school teachings on business strategy.

The Bottom Line

The BCG growth share matrix serves as a strategic tool for you to evaluate and prioritize your company's product lines using a 2x2 matrix that measures market growth against market share.

Products are categorized into four quadrants: stars, cash cows, question marks, and dogs—each category dictates specific managerial actions, such as investing in stars with high growth and market share or divesting dogs with low growth and share.

Although widely taught in business schools, the matrix has limitations, including not accounting for market dynamics or interdependencies among companies.