Boston Consulting Group (BCG) matrix

The Boston Consulting Group (BCG) matrix helps a diversified organisation plan the future of its products, subsidiaries or strategic business units (SBUs). It assesses each position on two dimensions: market growth as a proxy for attractiveness, and market share relative to the largest competitor as a proxy for strength. Plotting the portfolio across four quadrants supports resource-allocation choices. The method requires credible market intelligence about competitor shares, category boundaries and expected growth; relative share appears on the horizontal axis and growth on the vertical one.

When to use it

• To review and plan a portfolio of products, brands or SBUs.
• To discuss where the organisation should build, hold, harvest or divest.

Origins

Consultants at Boston Consulting Group, led by founder Bruce Henderson, developed the matrix between 1968 and 1970. BCG published the idea as “The Product Portfolio” in 1970. Building on the firm’s experience-curve work, it gave organisations a systematic way to analyse product lines and decide where investment should be concentrated.

Early versions placed high-to-low growth from top to bottom and high-to-low share from left to right. That orientation was a matter of convention, not theory. Later versions often reversed the horizontal scale to run from low to high in the familiar left-to-right direction.

What it is

Stars

Stars combine high relative share with high market growth. Their leadership may rest on monopoly power or a feature and benefit advantage. Rapid expansion often consumes cash for capacity, inventory and commercial investment, but a strong position may also support pricing power and future profit. At the time of the original example, the iPhone fit this category for Apple. In the first half of 2018, Tesla’s cars similarly represented a fast-growing, cash-intensive position in Elon Musk’s wider portfolio, though the business had not yet produced sustained profit.

Dogs

Dogs have both low relative share and low growth. Some are ageing offers that could be refreshed, but investment may not be justified in a static or declining market. Virgin Cola eventually occupied this position after sixteen years of attempting to win share from Pepsi and Coca-Cola in a mature carbonated-drinks category. Profit was difficult to sustain, and manufacturer Silver Spring entered administration in 2009.

Cash cows

Cash cows retain high relative share after market growth has slowed. Their established position allows them to generate more cash than they need, supporting investment elsewhere in the portfolio. Successful products often migrate here as their categories mature, and these positions can become a company’s most profitable. Kellogg’s cornflakes and Unilever’s Marmite illustrate durable brands that may play this role.

Question marks

Question marks operate in growing markets but hold low relative share. Investment might move one towards star status, yet structural barriers may prevent it from ever becoming a leader. Newly launched electronics and software frequently begin here: a small number succeed, while many are overtaken after a short life. Monitor the evidence and invest selectively rather than funding every high-growth story. BCG’s ideal is a balanced portfolio in which:

• a limited number of stars provide future promise without overwhelming the portfolio’s cash needs;

• several cash cows supply funding for stars and selected question marks;

• enough question marks create options for future stars, while dogs are retained only when their economics or strategic role justify them.

Developments of the model

The matrix has endured because its simplicity forces a resource-allocation conversation. The same simplicity limits its guidance. High share in a growing market does not guarantee profit when maintaining that share is costly. Growth can disappear when a substitute technology arrives, as BlackBerry learned despite earlier leadership. A low-share, low-growth product can still generate attractive cash if its costs remain controlled.

Products now move between quadrants faster than they did when the model was created, and market share is often a weaker predictor of advantage. A modern portfolio may therefore contain more question marks as options, recognising that only some will gain traction. Combine the matrix with product life-cycle analysis to add evidence about likely evolution (see

the Product life cycle article.)

Question marks Stars Cash cows Dogs

Sales

Time

Establishing Stimulating Improving Determining

needs product product the future take-up performance

How to use it

Apple provides a useful illustrative portfolio, although an external observer lacks the internal market definitions, economics and forecasts required for a definitive placement. The exercise demonstrates the method rather than claiming precise classification.

• Stars: The iPhone combined high growth and strong share, then began moving towards cash-cow status as the category matured and the product generated substantial profit.

• Question marks: At the time of the example, Apple Watch was new and entered with high expectations. Sales were significant but below some forecasts. Further investment might raise its share of watches and wearables, or buyers might prefer existing devices for similar benefits. Its trajectory had yet to become clear.

• Dogs: Mac had low share in a slow-growth PC market, technically placing it as a dog. Yet acceptable profit and strategic ecosystem value made automatic divestment illogical. The example demonstrates why classification cannot replace judgement.

• Cash cows: Mature positions such as iTunes, iPad and iPod—and eventually iPhone—could fund investment in question marks expected to become new stars.

Question marks Stars

Apple Watch

High

Growth

iPhone iPad iTunes

Mac

Low PC

iPod

Dogs Cash cows

Some things to think about

• Balance future options with current funding. Several question marks improve the chance of producing a star, but their cash consumption makes healthy cash cows essential.

• When products or SBUs resist credible placement, use a richer directional policy matrix and examine the ambiguity rather than forcing a quadrant.

Top practical tip

Plot cash generation and investment needs as well as quadrant position. A balanced portfolio needs enough cash cows to fund a deliberately selected set of question marks and stars.

Top pitfall

Do not let the labels dictate action. Market definition, profitability, synergies, disruption risk and strategic option value can justify retaining a dog or declining to invest in a star.

Further reading

• Henderson, B.D. (nineteen seventy). “The Product Portfolio.” BCG Perspectives.
• Stern, C.W. and Stalk, G. Jr. (eds.) (nineteen ninety-eight). Perspectives on Strategy from the Boston Consulting Group. Wiley.