BCG Matrix (Boston Consulting Group) - very popular concept in the world of marketing, developed by a business consultant to classify the strategic business units based on relative market share and market growth of each product in accordance with their respective positions, whether in the position of question mark, star, cash cow or the dog position.
The use of this model would graphically show each different strategic business units can be put together and identify the strategies used to improve the combination of business units. This model can generally be used for various purposes, including:
1. To estimate the market growth rate and relative market share of each business unit or product, so the company can know where they are, and how its strength.
2. To determine how to manage the business unit if the business unit itself is in a position more than one business unit, for example at the position a question mark, or the dog star.
3. To determine the direction of goals, designing strategies, developing marketing programs and budgets which is required.
Matrix of relative market growth of market share has four cells, which each show different characteristics and treatments, namely:
1. Question mark
- High market growth potential but relatively low market share.
- Requires significant investment to follow the rapid growth rates and to shift to a star.
- Cash flow tend to be negative, because demand is still very large investment.
2. Star
- Market growth is very fast, so it allows the company to obtain a large market share.
- Need investment to grow as fast as a big growth market, so cash flow is not necessarily positive.
3. Cash cow
- Generally the cash cow has market growth that is declining.
- Can enjoy economies of scale but producing a very high profit margins.
- Companies can use this business to support other business units so as not to lose market share or embed return investment to the same product for not switching to cash cow dog.
4. Dog
- Market growth is very slow and very low market share, the future of product is miserable
- Products generate low profit margins and even losses
- Divesture is generally recommended alternative for companies that tend to not experience a prolonged loss.
1. To estimate the market growth rate and relative market share of each business unit or product, so the company can know where they are, and how its strength.
2. To determine how to manage the business unit if the business unit itself is in a position more than one business unit, for example at the position a question mark, or the dog star.
3. To determine the direction of goals, designing strategies, developing marketing programs and budgets which is required.
Matrix of relative market growth of market share has four cells, which each show different characteristics and treatments, namely:
1. Question mark
- High market growth potential but relatively low market share.
- Requires significant investment to follow the rapid growth rates and to shift to a star.
- Cash flow tend to be negative, because demand is still very large investment.
2. Star
- Market growth is very fast, so it allows the company to obtain a large market share.
- Need investment to grow as fast as a big growth market, so cash flow is not necessarily positive.
3. Cash cow
- Generally the cash cow has market growth that is declining.
- Can enjoy economies of scale but producing a very high profit margins.
- Companies can use this business to support other business units so as not to lose market share or embed return investment to the same product for not switching to cash cow dog.
4. Dog
- Market growth is very slow and very low market share, the future of product is miserable
- Products generate low profit margins and even losses
- Divesture is generally recommended alternative for companies that tend to not experience a prolonged loss.
An honest man nearly always thinks justly.
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