BCG matrix
was invented by Boston Consulting Group in 1970s so that
organization can manage their portfolio strategy effectively. There
are two inputs that form the BCG framework. They are market growth
and market share to a portfolio of segments, products or business.
This helps the business to draw conclusion on allocation of
resources across the portfolio.
The four quadrant/ business units of BCG are: -
- Star - This
represent the business units which has large market share in the
fast growing industry and require lots of investment in order to
generate cash and to stain its market leader position. The business
units are highly competitive and on maturity of industry it may
become a cash cow.
- Cash cows -
This represent the business units which has large market share in a
mature and slow growing industry. The investment requirement is
little and the cash generated are used for investment in other
businesses units. They implement stability strategies and are the
base of an organization.
- Question
mark - These are the business units with low market share
and are placed in a high growth industry. In order to gain market
share, the cash requirement is very high. There is no fixed
strategy as such and based on the market shares it adopt strategy
like with dominant market share it adopt expansion strategy and
with less market share it adopt retrenchment strategy.
- Dog - These
are the business unit which has very less market share and are
placed in low-growth markets. These unit does not require huge cash
investment nor generate cash. These units face cost disadvantages
due to low market share so they adopt retrenchment strategies in
order to gain market share. Organization should avoid number of
dogs and should focus on minimizing it.