Strategy
The BCG growth-share matrix
Most firms operate in more than one line of business.
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The BCG growth-share matrix vs The growth/share matrix (BCG)
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Strategy
The growth/share matrix (BCG)
The latter, as defined by the Boston Consulting Group, is one where you have a low relative market share in a slow-growing market.
Read articleChoice logic
Use this when.
Describe the composition of a diversified company.
Use it as a portfolio lens alongside the Attractiveness/Advantage Matrix. If the models disagree, investigate the assumptions rather than choosing the answer you prefer.
Extracted signals
Strengths, limits, and pitfalls.
The BCG growth-share matrix
- Use the matrix as an initial portfolio picture, then test market attractiveness, business strength, synergies and market boundaries with deeper evidence.
- Define each market carefully, calculate the growth and relative share measures, then plot all businesses with bubble size representing a useful third variable such as revenue or capital employed. This visual overview was especially valuable for conglomerates holding 50 or more businesses.
- The classic cash flow logic moves surplus from cash cows to promising question marks, which may gain share and become stars; mature stars later become cash cows and finance the next generation. Dogs are harvested, sold or selectively repaired.
Watch for
- Labels can become self fulfilling. Starving a mature business of sensible reinvestment may cause the decline the ‘cash cow’ classification predicted.
The growth/share matrix (BCG)
- Draw the 2 × 2 matrix with explicit market definitions, forecast growth and relative share calculations, then test the conclusion with a multi factor portfolio view.
- Place relative market share on the horizontal axis. Divide the segment’s share by the share of its leading competitor rather than using absolute share alone. A 20 per cent share against a 10 per cent rival yields 2.0×; the same share against a 40 per cent leader yields 0.5×.
- Place market growth on the vertical axis, using a forecast annual real growth rate over the next several years. Plot each segment and classify it:
Watch for
- A different market boundary can move a segment to another quadrant. Do not turn a proxy and a label into an automatic investment decision.
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