BCG Matrix: How to Balance Your Product Portfolio

The Boston Consulting Group Matrix (or the BCG Growth-Share Matrix or the Product Portfolio Matrix) is a business strategy graph and decision-making tool. It compares the relative market share of strategic business units with their market growth rate to help ensure a well-diversified company.

The chart breaks down into four quadrants, named after Stars, Question Marks, Cash Cows, and Dogs, respectively. Each one signifies something different about how various goods in a portfolio of products are performing in terms of both market share expansion and growth potential.

These economies of scale indicate higher cash generation the further up on either axis they go. Per BCG’s models, the x-axis traces high market share to low market share from left to right, while the y-axis tracks high growth rates to low growth rates from top to bottom. In other words, the further to the left on the x-axis, the better the market share—and the further to the top on the y-axis, the better growth rate for any given product. Note that other companies might invert the way they represent market shares along either axis.

Bruce Henderson, the founder of Boston Consulting Group, debuted the matrix, a strategic planning tool, in 1970 to help companies take advantage of growth opportunities and competitive advantage for their product lines. He believed companies could use this template to become market leaders by managing cash flows throughout the product life cycle. For Henderson, the key was knowing when to capitalize on growing market share and industry growth rates and ascertaining how to fund this sort of expansion with savvy portfolio management.

Knowing your way around the BCG Growth-Share Matrix can really help with strategic management. These four quadrants make up this useful strategic planning tool:

1. 1. Stars: Products that are stars have both a high share of the market and high growth rates. Staying the largest competitor for market share requires significant investment. Using the steady flow of money from cash cows helps take advantage of high growth rates to maintain this sort of large market share. Stars are in the top left quadrant of the BCG Matrix.
2. 2. Question Marks: Products called Question Mark exist in high-growth markets but don’t yet have a large share of those markets. Portfolio analysis can be helpful in turning these products into Stars, as many have great future potential for increasing market share. Question Marks are in the top right corner of the BCG Matrix.
3. 3. Cash Cows: Product types that are Cash Cows exist in low-growth markets but hold a very high share of them. As a result, they bring in large amounts of cash without much need for further investment to expand. These older, reliable products often yield the profits companies need to turn new products into Question Marks or Stars. Cash Cows are in the bottom left corner of the BCG Matrix.
4. 4. Dogs: Products that are Dogs exist in low-growth markets and have low market share overall. These are products that aren’t yielding much in terms of industry attractiveness, competitiveness, profits, or much else. If a product consistently ends up in the Dogs quadrant, it might be a sign it’s time to consider its divestiture from the company. Dogs are in the bottom right corner of the BCG Matrix.

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