Unless a Dog has some other strategic aim, it should be liquidated if there are fewer prospects for it to gain market share. Market growth rate represents the overall industry growth, indicating how quickly the market is expanding. They introduced the Growth-Share Matrix which is a designing and a planning tool that prepares graphical representations on the basis of a company’s products and services. The Growth-Share Matrix categorizes a firm’s products into four divisions namely Dogs, Cash Cows, Stars, and Question Marks. The four divisions are based on the Relative Market Share and Growth Rate Of The Market. This Matrix immensely helps the company to make decisions regarding investment, divestment, liquidity, and retrenchments.
Related Strategy Frameworks to the BCG Matrix
Besides knowing which products need to be promoted more, they will know which products will be successful. Coca-Cola is a globally recognized consumer product company with multiple product lines that can be classified into various categories using the BCG Matrix. An example of this categorization for some of their products is provided below. There what does question mark symbolize in bcg matrix are three products under the umbrella of Amul that come under the Cash Cow category and they are Amul Milk, Amul Butter, and Amul Cheese. The market share of these products is not likely to undergo colossal gains but their current spot makes them a high revenue contributor. The most momentous stage for the entire matrix is the key definition of the market.
Define the market
If, however, management misjudges this, then they may be left with a dog in the end that will sell for less than they could have realized if they divested early. The BCG framework suggests that surplus cash should be transferred from a conglomerate’s cash cows to the stars and the problem children, while the dogs should be divested. Relative market share can be calculated by comparing your firm’s brand market share to your competitors in a given industry. For example, if your competitor has a market share of 25% and you have a market share of 10%, your relative market share would be 0.4. Products with low market share typically require substantial investment to become competitive.
Relative Market Share
Since then, it is rare to find a company that doesn’t regularly evaluate all its business lines on a monthly basis with a strict set of key performance indicators. Moreover, market share is no longer a direct predictor of sustained performance. High-growing markets have a large pool of potential customers, creating numerous opportunities for companies to generate revenue. Traditionally, companies invested heavily in high-growth markets and maintained profitability with minimal investment in low-growth markets.
- Example of Question Marks – Galaxy 7, with a negative reputation due to overheated battery and safety concerns, is an example of the Problem Child for Samsung.
- If Question Marks do not succeed in becoming a market leader, they might degenerate into Dogs when market growth declines after years of cash consumption.
- The intent of the matrix is to help companies make good portfolio-management decisions, focusing investment in the areas that are likely to provide returns and fund future growth.
- Business News Daily provides resources, advice and product reviews to drive business growth.
- Most business models analyse situations and products or services that are profitable currently.
- The BCG matrix is a simple framework that all companies can use to evaluate their products.
Besides the BCG Matrix, there are other portfolio management frameworks you might want to have a look at such as the GE McKinsey Nine Box Matrix. Once you have determined each product or business unit’s market share and growth rate, the next step is to draw the circles on a matrix. The BCG matrix is a simple two-by-two grid with a market share on the x-axis and a growth rate on the y-axis. The product group known as the “Question Marks” has a low market share but is experiencing high growth. Although not currently very profitable, these products have the potential for market share growth and can become cash cows and, ultimately, stars with appropriate investments. The Boston Consulting Group’s management expert, Bruce Henderson, created it as a tool for portfolio planning in the early 1970s.
The well-known management consulting company Boston Consulting Group is known by the initials BCG. Question Marks have low market share in high-growth markets, requiring significant investment. The two measurements used in the BCG Matrix are market share and market growth rate.
At the same time, the GE matrix aids businesses in determining their strategy concerning multiple product lines. Therefore, the GE matrix was developed to overcome the limitations of the BCG matrix. I love understanding strategy and innovation using the business model canvas tool so much that I decided to share my analysis by creating a website focused on this topic. The BCG Matrix is best used when a company needs to evaluate its product portfolio to make strategic decisions about resource allocation, especially in dynamic market environments. Get a clear understanding of the market position of products and services of either your business or competitors, with this BCG Matrix template. The product group under “Stars” has a significant market share and is experiencing rapid growth.
This assessment model is also known as the Boston Matrix, the Growth Share Matrix or Boston Consulting Group Matrix. Question Marks are those business entities that have low market shares in a fast pacing market. Question marks are the most managerially radical products and need pervasive investment and resources to escalate their market share. They also need extensive monitoring because investments in question marks are broadly funded by cash flows.
The strategic choices which can be incorporated are product development, diversification, divestiture, retrenchment. When there is a slowdown in market growth, they metamorphose into Cash Cows and finally, the Cash Cow turns into Dogs. The strategic choices which can be incorporated are Market Development, Market Penetration, Product Development, and divestiture. The fast cash generated through cash cows can be utilized to cover the operational and administrative costs of the company and to turn Question Marks into Cash Cows. Question marks typically grow fast but consume large amounts of company resources.
For example, Apple’s iPhone is often considered a star in the tech sector. The BCG growth share matrix breaks down products into four categories known as dogs, cash cows, stars, and question marks. Dogs, sometimes also referred to as Pets, are units or products with a low market share and low growth rates.
