Growth-share matrix (also known as the product portfolio matrix, Boston Box, BCG-matrix, Boston Matrix, Boston Consulting Group analysis, portfolio diagram) is a method for evaluating the strategic importance of business units. Developed by the Boston Consulting group in the early 1970s, the method categorizes business units and their products into four categories: stars, cash cows, question marks and dogs.
Stars are the most attractive business units and products. They generate high market shares and usually have high growth rates. Such business units and products require heavy investments in order to maintain their market leading positions; however, this is offset by high returns and profits.
Cash cows are the least attractive business units and products. They generate high profits with minimal investments, but they have low market shares and low growth rates. Cash cows generate the profits to support the other business units and products.
Question marks are the business units and products that have a low market share, but in a rapidly growing market. They require heavy investments to penetrate the market and increase their market share; however, this can result in high profits if their market share goal is met.
Dogs are the least attractive business units and products. They generate low market shares and low sales with minimal investments. Dogs typically do not generate enough profits to be of any use and should be phased out or sold off.
The Growth-share Matrix can be a useful tool for understanding the strengths and weaknesses of a company’s business units and products. By understanding where a business unit or product falls in this matrix, a company can make better decisions about how to allocate its resources in order to maximize profits and growth.
For example, a company may look at its business units and products and determine that there are two stars, one cash cow, one question mark, and two dogs. It can then determine that its resources should be allocated primarily to the stars, in order to maintain their market share and growth rates, and to the question mark, in order to help it achieve its market share goal. The cash cow can be used to finance these initiatives, while the dogs should be phased out or sold off.
By understanding where a business unit or product falls in the Growth-share Matrix, a company can make informed decisions about how to allocate its resources in order to maximize profits and growth. It can also help to identify areas where further investment may be necessary, and which areas should be cut off or sold off. This can help to foster better decision making and resource allocation, resulting in improved profitability and growth.
