The Boston Consulting Group Matrix (Boston matrix, BCG matrix, growth-share matrix, product portfolio, or portfolio diagram) is a diagram showing how market share and market growth contributes to the outlook of particular business units or product lines. The matrix was originally used by the Boston Consulting Group to illustrate graphically how a business's portfolio of business units or product lines relate to the business's cash flows.
Question Marks: Question marks are products that currently have low growth but exist in a high-growth market. Because of this, they require significant cash investments and may not be profitable. Most business units begin as question marks.
Stars: Stars are products that have a high market share in a high growth market. Because of this, they require significant cash investment, but because they are market leaders they are profitable. If a "question mark" is successful in developing a competitive advantage, it will become a star.
Cash Cows: Cash cows are high performing business units or product lines that have a large market share in a slow-growth or mature industry. Cash cow brands are brands that enjoy a market leadership position, and have a competitive advantage that allows the business unit or product to remain highly profitable. Cash cows typically evolve from "stars" when the market matures. Because the market is one of low-growth, the intuition is that little investment should be made in cash cows. Cash cows need some investment to maintain their market leadership position. If cash cows are "milked" to fund stars and question marks, it is likely that they will end up becoming dogs. Often students look and the BCG matrix as implying that all cash cows become dogs, and since there is no way around that, cash cows should be milked. This oversimplification has led to the BCG matrix being removed from some marketing textbooks.
Dogs: Dogs are products with low market share in low growth industries. They require little investment but are not very profitable. If a cash cow loses its market leadership position, it will become a dog.
The intuition from the Boston Consulting Group Matrix is that products and business units begin as question marks, evolve into stars, turn into cash cows, and eventually fade into dogs. A business can use cash from its cash cows to fund investments in question marks and stars.
© BrainMass Inc. brainmass.com August 12, 2020, 8:30 am ad1c9bdddf