BCG-Matrix – Growth

Smart Structuring methode BCG-Matrix
Category Growth
Short overview

The BCG matrix cannot be missing in the growth methods. The founder of the Boston Consulting Group, Bruce Henderson, developed it in 1970, and its main purpose is to evaluate a company’s products or offerings according to market share and market growth. A product or product area can be represented in a matrix according to turnover size and phase. The four areas of the matrix are Questionmark, Star, the Cash Cow and Poor Dog. The instrument is a classic in portfolio management.

Developed by Bruce Henderson, Boston Consulting Group
Online Reference BCG Classics Revisited: The Growth Share Matrix
Book Die Portfolio-Analyse am Beispiel der BCG-Matrix, Jürgen Weimann
Die Anwendung der Ansoff Matrix für Wachstumsstrategien, Robin Teiner
Video Alanis Business Academy [15:07]
Key words Growth, Portfolio, Structuring, BCG-Matrix, Ressource
Insights

The BCG-Matrix shows the variables market share and market growth in percentage points on its axes, i.e. what share of the respective product or product group the company under consideration has and how strongly the associated market is growing. The market share is plotted on the x-axis, the market growth on the y-axis.

The quadrant with a low market growth and market share is called “Poor Dog”, i.e. the product or product group has a low market share and the market has low growth and probably high competition. This is an unattractive area from the point of view of the company.

The second quadrant is characterized by a low own market share, but high market growth. It is known as a “Questionmark” or “Problem child”. A problematic quadrant, because there is actually an attractive market, but the own position is (still) weak – due to a low market share. This quadrant is by far the most difficult to assess. Any participation in market growth will probably require a high allocation of resources.

The next quadrant is the “star” of all – high market growth and a strong own position due to a high market share. The ideal position to capture current and future revenues and profits, as there is still high market potential in this area.

This market potential no longer exists in the last quadrant “Cash Cow”. Although the company under review still has a high market share of its products, the market is no longer growing. This is a typical area in which profits are skimmed off to invest in “stars” and “question marks”. But also an important quadrant where today’s sales and profits are made, but probably in an intense competitive environment.

Process The methodology is applied in five steps: the analysis of the data, an allocation in the matrix, the decision on the allocation of resources, the strategic development of the own portfolio and finally the regular review.

  1. Analysis
    The profound research of the market share of the own products and the market itself. A difficult task for SMEs that may be operating in niche markets. After all, the task is to find out comparative figures for market growth and the own market position. Industry reports or studies can help here.
  2. Allocation on the matrix
    Then follows the classification of the own products or product lines according to sales volume and position in the matrix.
  3. Management decision
    Every company has limited resources, therefore the BCG matrix creates transparency about the situation of its own offer to the market – in its current position and with regard to market growth. Here it is to be decided in which areas the limited resources are to be invested.
  4. Strategic development of the portfolio
    How can the economic ideal in the “Star” quadrant be achieved – today and in the future? The management of the entire portfolio, the targeted use of own resources to create the necessary conditions for this. For the “Problem Childs”, the market share should be expanded to make them “stars”, while the “Dogs” should be eliminated and the “Cash Cows” should be skimmed off in the best possible way, while reducing investments.
  5. Periodic review
    In any case, the matrix must be checked regularly. Especially in highly competitive markets, the intervals should not be too long.
Best usage for… Assessment and transparency of the own portfolio and its strategic development.
Weak result when… … there is a lack of sufficient data for an in-depth analysis of the products or product areas and the underlying market No desire to strategically balance the own portfolio.
Template Many templates available on the Internet, a lot of literature and references to this method – standard in business literature.
Needed time span Requires well-founded preliminary work in order to relate the products or product groups to each other according to their sales and contribution margin. From 1 day up to several weeks, depending on the size of the company under consideration.
Type of presentation
  1. Table program
  2. Presentation document
  3. Software-based
Size of group Depending on the scope of the task, a team of 2 people or more is recommended.

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