However, they have the potential for growth. They demand high investments to capture some market share, but whether this cash infusion will provide returns will be known only in the future. Question marks, also known as “problem children,” have small growth rates in a high-growth market. They are often seen as “cash traps,” in which the investments already made do not generate profits. They neither generate cash nor require investments. Invest in cash cows, but only to maintain their level of productivity, and until they become “dogs.”ĭogs, also known as “pets,” have a low market share in a low-growth market. Therefore, such units do not require cash but rather provide cash.Ĭash cows can be “milked” to generate funds for other business units under the corporation, to turn “question marks” into “stars,” to repay corporate debt, to issue dividend to share holders, or to fund research. “Cash cows” are business units with a high market share but find themselves in a mature, low-growth market. Invest in stars in the hope that they become cash cows and generate funds for the corporation’s future plans. Stars may become “cash cows” if they can maintain their market share until the market itself stars to decline. “Stars” are business units that have a high market share but consume a high amount of cash as they are situated in a high-growth market.Ĭompanies that are the first to enter a market and monopolies are described as “stars.” Stars generate cash because of their high market share, but because a high-growth market also demands cash, most of the cash that stars earn is absorbed by their capacity-building activities. Let us study the four categories identified in the BCG matrix and how they can be used to decide on the appropriate business strategies. The quadrants of the BCG Growth Share Matrix The management team can then decide on the right business strategy for each unit. The matrix categorises business units as “stars,” “cash cows,” “dogs,” and “question marks,” depending on whether they deserve cash infusions or need to be closed down. It plots business units (or products) that form part of a corporation’s portfolio on a grid of four equal quadrants on the basis of their market growth and market share (which is why the BCG Matrix is also called the “Growth-Share” Matrix). The advantages of the BCG growth share matrix are manifold.
The BCG Growth Share Matrix was evolved in the early 1970s by Bruce Henderson, founder of the Boston Consulting Group, to help corporations make investment and disinvestment decisions related to their business units or product portfolios.
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