Question

The BCG (Growth-Share) Matrix is old but has stood the test of time. How significant and practicably usable is it today, in the light of vast developments in management tools that help assess market conditions. Use an organization of your choice for analysis.

Answer 1

The Boston Consulting group’s portfolio matrix (BCG matrix), or also called Growth/Share matrix is designed to help a business by considering business growth opportunities by reviewing their portfolio of products to decide where to invest, develop or to discontinue products.

The matrix is based on an analysis of market growth and relative market share and is divided into four quadrant, as shown in the diagram as follows:

1. Dogs: These are product with low growth or market share.

The company should aim to remove any dogs from their product portfolio as they are drain on their resources. For example, the company from automotive sector can discontinue trading and production of new cars, though it can continue with its spare parts trading and production.

2. Question mark or Problem child: Product with high market growth with low market share.

These products needs significant investment to get into the star quadrant and to reap return. For example, computer game companies like Rovio, creator of very successful Angry Bird game had to develop lot of computer games before gaining huge successful product like Angry Bird.

3. Stars: Product with high market growth and high market share.

The product can be a market leader and they require ongoing investment to sustain in the market. They generate more returns compared to other product in the portfolio.

4. Cash cows: Product with low market growth and high market share.

These are often mature well established product and the company tries to generate maximum profit from it without discontinuing it from the portfolio. For example, Procter & Gamble, which manufactures Pampers nappies to Lynx deodorants has often been described as a ‘cash cow company’.

BCG models is based on product rather than services, however it does applies to both. The British retailer, Marks & Spencer (M&S) uses this model as a digital marketing strategy. The company has wide range of product portfolio and every element of the matrix can be identified across their ranges.

Stars: For example, in Lingerie, M&S, once known as a place for ladies underwear is still the United Kingdom market leader with high growth and high market share.

Question mark/Problem child: For example, in food, M&S for years refused to consider the product portfolio and today though not a major supermarket, it has over 400 Food stores across the country which demonstrate high growth and low market share.

Cash cows: For example, in Classic range, M&S has low growth and high market share with strong supporter.

Dogs: For example, in Autograph range, which is a premium range, M&S has low market share and low growth.

The BCG matrix has other applications as well than the product strategies alone. For example, the other uses of the matrix in digital marketing strategy development include the Smart Insights:

Content marketing matrix: The matrix is used to review the portfolio of content assets against competitors.

Content optimization matrix: The matrix is used to assess the value of the web pages in generating leads and sales.

Content distribution matrix: The matrix reviews the options for building traffic for a website using different channels.

The BCG is a simplistic model and it can be difficult to classify products in smaller business where the relative market share is too low to quantify. The model is also based on the concept that market share grows by spendign more on the marketing budget.