Growth-Share Matrix

The Growth-Share Matrix, also known as the BCG Matrix or Boston Consulting Group Matrix, is a strategic business analysis tool developed by the Boston Consulting Group in the 1970s. It is used to help companies evaluate their product portfolio and allocate resources based on market growth rates and relative market shares. The matrix provides a visual representation of a company's products or business units, classifying them into four categories: Stars, Cash Cows, Question Marks, and Dogs.

The Growth-Share Matrix is built on two main dimensions:

1. Market Growth Rate: This axis represents the growth rate of the market in which a product or business unit operates. It is an indicator of the market's attractiveness and potential for future growth.
2. Relative Market Share: This axis represents a product or business unit's market share compared to its largest competitor. It is an indicator of the competitive strength and position of a product or business unit within the market.

Based on these dimensions, products or business units can be classified into four categories:

1. Stars: These are products or business units with high market share in high-growth markets. They often require significant investments to maintain their market position and fuel growth, but they also have the potential to generate substantial profits. The goal for Stars is to continue investing in them to maintain their market leadership and eventually turn them into Cash Cows as the market matures.
2. Cash Cows: These are products or business units with high market share in low-growth markets. They typically generate strong cash flows, as they require less investment to maintain their market position. Companies should use the cash generated by Cash Cows to fund Stars and Question Marks or distribute profits to shareholders.
3. Question Marks: These are products or business units with low market share in high-growth markets. They have potential for growth, but their future success is uncertain. Companies need to decide whether to invest in these products or business units to increase market share (and potentially turn them into Stars) or divest them if they don't show potential for growth.
4. Dogs: These are products or business units with low market share in low-growth markets. They generally generate low profits or even losses and should be divested, liquidated, or restructured unless they serve a specific strategic purpose.

The Growth-Share Matrix is a useful tool for portfolio analysis and resource allocation decisions. However, it has some limitations, such as oversimplifying complex market dynamics and not considering factors like synergies between products or business units, changes in market conditions, and variations in profitability across different segments. Despite these limitations, the Growth-Share Matrix remains a popular framework for strategic decision-making and portfolio management.

See Also

• IT Strategy (Information Technology Strategy)
• IT Governance
• Enterprise Architecture
• Chief Information Officer (CIO)
• IT Sourcing (Information Technology Sourcing)
• IT Operations (Information Technology Operations)
• E-Strategy