BCG GROWTH-SHARE MATRIX

Companies that are large enough to be organized into strategic business units face the challenge ofallocating resources among those business units. In the early 1970, the Boston Consulting Group developeda model for managing a portfolio of different business units (or major product lines). The BCG growthsharematrix displays the various business units on a graph of the market growth rate vs. market sharerelative to competitors:
Resources are allocated to business units according to where they are situated on the grid as follows:

1. Cash Cows - business units that have a large market share in mature, slow growing industries. Cash cows
require little investment and generate cash that can be used to invest in other business units.

2. Stars - business units that have a large market share in a fast growing industry. Stars may generate cash, but
because the market is growing rapidly, they require investment to maintain their lead. If successful, a star
will become a cash cow when its industry matures.

3. Problem Child or Question Mark - business units that have a small market share in a high growth market.
These business units require resources to grow market share, but whether they will succeed and become
stars is unknown.

4. Dogs - business units that have small market share in a mature industry. A dog may not require substantial
cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic
purpose, it should be liquidated if there is little prospect for it to gain market share.
The BCG matrix provides a framework for allocating resources among different business units and allows
one to compare many business units at a glance. However, the approach has received some negative
criticism for the following reasons:

1. The link between market share and profitability is questionable since increasing market share can be very
expensive.
2. The approach may overemphasize high growth, since it ignores the potential of declining markets.
3. The model considers market growth rate to be a given. In practice, the firm may be able to grow the market.

The size of the circle indicates the amount of revenue the product/brand/sbu contributes to company
turnover