Focusing on this business unit would be the smart move going forward. Instead of focusing on dying products or cash cows that sustain themselves without much effort, your company can focus on creating new winning products and businesses.įor example, your star product has the lion’s share of the market in a marketplace that’s growing at a rapid pace. Prioritize the right business or product quickly to establish a first-mover advantage
You should use a BCG Matrix because it helps you prioritize business and products, cut waste, and create a robust portfolio. Why you should use a BCG Matrix - key benefits It’s all about where the market is going and how your product’s doing within that market.īut before you dive in and create your own, you should understand the benefits and your ultimate goal for creating a BCG Matrix in the first place. Below, we’ll cover a real example and showcase how the different categories work.Īs you can see, the quadrants have nothing to do with the objective revenue numbers. If you’re struggling to visualize it, don’t worry. The BCG Matrix can help you make sense of your portfolio of products and make smarter decisions about future investments in both R&D and marketing. Just because you deal in pixels doesn’t mean you’re immune to regular business mistakes like overspending on a product with little potential. While first created to manage product lines for manufacturing companies in the ‘60s and ‘70s, it’s equally relevant for tech startups that offer a variety of digital services. Companies use the framework to decide which businesses or products to invest in to maximize growth potential and profitability. The different categories help you simplify complex decision-making about investment and business focus. Question marks: Currently low market share in a fast-growing market.Dogs (or pets): Low market share in a market with a slow growth rate.Cash cow: High market share in a mature market.Stars: High market share in a high-growth market.Market growth rate: The rate at which a certain market grows in revenues compared to the previous year.īased on these two metrics, you divide your company’s businesses or products into four categories:.Relative market share: Your share of the market compared to your largest competitor.To help you roughly estimate the profitability of a business, the matrix uses the two metrics of relative market share and market growth rate. It divides a company’s business units into categories based on their respective market shares and market sizes. The Growth Share Matrix, also known as the BCG Matrix, is a portfolio management framework developed by the Boston Consulting Group’s founder in 1968. BCG Matrix definition: What is a Growth Share Matrix?
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