Boston Consultancy Groups Growth Share MIX (BCG Matrix)

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The BCG, is a leading management firm in the USA, developed and approached as growth share matrix. There are two variables taken in this matrix work, the market growth rate and the relative market share of a SBU (strategic business unit).The BCG Matrix categorises the SBU’s in four groups:

a)Question Mark: These are those SBU’s which are struggling to make their presence felt in a high market growth area. A firm has to decide whether it should continue to invest or withdraw from this segment. The SBU is characterised by high expenditures and low revenues, thus leading to adverse financial situation for the company. Sales are low, still a high proportion of consumers are unaware of the SBU’s brand and there is generally reluctance on the part of the customer to try a new product.

b) Stars: These are those SBU’s in which the firm has acquired market leadership. This situation occurs only when the company through its strategies has been able to convert into stars. This situation is not necessarily a positive cash flow one. Due to high competition the company may have to undertake aggressive advertising, sales promotion or better discount structures due to which the expenditures may increase. Thus sales revenue generated by stars SBU’s is used for maintaining them at their pre-eminent position.

c) Cash Cows: These are SBU’s that generate the much-desired cash for the company. It is in those cases where the market has stopped growing and the firm already occupies the market leader position. The brand occupies the top of the mind position in the consumer’s mind and also notices a family reasonable brand loyalty existing in such cases. Strategically the more cash cows in a firm product portfolio, indicate’s its stronger financial position.

d) Dogs: These are the SBU’s that have lost their glamour, the firm has lost their market leadership and the market is also not growing at a high rate. Here the firm incurs losses. The strategy recommended here is to “Kill” the “Dogs” or drop the product from the product line. However most marketers for emotional reasons, are hesitant to take their decision and one does find that a loss making SBU is allowed to continue.

Source: HR Concepts

Compiled and Edited by

Mr. S. Murugesan - Lecturer

Dr. P. N. Narayana Raja - Principal

Madurai Institute of Social Sciences

(Run by: DVR Foundation for HRD)

Madurai, Tamil Nadu, India