Growth Share Matrix
The growth share matrix is a framework developed by the Boston Consulting Group (bcg) in the 1960s to help companies think about the priority (and resources) that they should give to the different businesses in their portfolio. Commonly known as the Bostonmatrix, it puts these businesses individually into one of four categories, each with a memorable name.
These names – cash cow, star, dog and question mark – helped the four categories to sink into the collective consciousness of managers all over the world. The two dimensions of the matrix are relative market share (or the ability to generate cash) and growth (or the need for cash).
- Cash cows are businesses that have a high market share (and are therefore generating lots of cash), but which have low growth prospects (and therefore a low need for cash). They are often in mature industries that are about to decline.
- Stars have high growth prospects and a high market share.
- Question marks have high growth prospects but a comparatively low market share (and have also been known as wild cats).
- Dogs, by deduction, are low on everything – growth prospects and market share.
The conclusions to be drawn from this analysis are that the surplus cash from a conglomerate’s cash cows should be transferred to the stars and the question marks, and the dogs should be closed down or sold off. In the end, question marks have to reveal themselves as either dogs or stars, and cash cows become so drained of finance that they inevitably sooner or later turn into dogs. The trouble with this colourful matrix is that classifying businesses in this way can be self-fulfilling. Knowing that you are working for a dog is not particularly motivating, whereas working for an acknowledged star usually is.
Moreover, some companies misjudge when industries are mature. This leads them to decide that businesses are to be treated as cash cows when they are in fact stars. They may be in a business that is merely taking a break before surging forward again. One such industry was consumer electronics. Considered by many to be mature in the 1970s, it rebounded in the 1980s with the invention of the cd and the vcr. Not, however, before some companies had consigned their electronics businesses to the fate of the cash cow.
The growth share matrix has been blamed for persuading companies to focus obsessively on market share. In a world where markets are increasingly fluid, this can cause them to lose their way. If Lego, for example, considers its market to be mechanical toys, it misses out on the fact that it also competes with companies such as Nintendo for a share of young boys’ minds. The growth share matrix began a fashion among consultants for creating matrices. Now no self-respecting report or theory is complete without one or two.