Understanding the BCG Growth Share Matrix and How to Use It

What Is the BCG Growth Share Matrix?

The Boston Consulting Group (BCG) growth share matrix is a planning tool that uses graphical representations of a company’s products and services to help the company decide what it should keep, invest more money in, or sell.

The company’s offerings are plotted in a four-square matrix. The y axis represents the rate of market growth, and the x axis represents market share.

The BCG growth share matrix was introduced by the Boston Consulting Group in 1970.

Understanding the BCG Growth Share Matrix

The BCG growth share matrix breaks down products into four categories known as dogs, cash cows, stars, and question marks. Each category quadrant has its own set of unique characteristics.

Dogs (or Pets)

A company is considered a dog and should be sold, liquidated, or repositioned if its product has a low market share and is at a low growth rate. Dogs are found in the lower right quadrant of the grid.

Dogs don’t generate much cash for the company because they have a low market share and little to no growth. They can turn out to be cash traps, tying up company funds for long periods, so they’re prime candidates for divestiture.

Cash Cows

Products that are in low-growth areas but for which the company has a relatively large market share are considered cash cows. The company should milk the cash cow for as long as it can.

Cash cows are seen in the lower left quadrant. They’re typically leading products in mature markets.

These products often generate returns that are higher than the market’s growth rate. They sustain themselves from a cash flow perspective. These products should be taken advantage of for as long as possible.

The value of cash cows can be easily calculated because their cash flow patterns are highly predictable. Low-growth, high-share cash cows should be milked for cash to reinvest in high-growth, high-share stars with high future potential.

Stars

Products that are in high-growth markets and that make up a sizable portion of that market are considered stars and should be invested in. Stars appear in the upper left quadrant.

Stars generate high income but also consume large amounts of company cash. A star eventually becomes a cash cow when the market’s overall growth rate declines if it can remain a market leader.

Question Marks

Questionable opportunities are those in high growth rate markets but in which the company doesn’t maintain a large market share. Question marks or problem children appear in the upper right portion of the grid.

Question marks typically grow fast but consume large amounts of company resources. Products in this quadrant should be analyzed frequently and closely to see if they’re worth maintaining.

Limitations of the Matrix

The matrix is a decision-making tool. It doesn’t necessarily take into account all the factors that a business must ultimately face. Increasing market share may be more expensive than the additional revenue gained from new sales. Product development can take years, so businesses must plan carefully for contingencies.

The matrix only classifies businesses as low and high, so it leaves midsize businesses out of the mix. Midsize companies often make up a big part of the market, so leaving them out means that the business environment isn’t truly reflected.

The BCG matrix assumes that all businesses operate independently of each other, but that isn’t always necessarily true. Certain players in the market, such as dogs, can end up giving others a boost—sometimes unintentionally.

Example of a BCG Growth Share Matrix

We can apply the growth matrix to many companies in the real world. Apple (AAPL) is a great candidate. Let’s take a look at the products Apple has on the market according to the matrix categories:

• Star: iPhone
• Cash cow: Macbook
• Question mark: Apple TV
• Dog: iPad

The company earned $383.28 billion in net sales in 2023, out of which almost $298.1 billion was attributed to its products section. The remaining $85.2 billion came from its services division.

• The majority of Apple’s sales come from its most popular product. The iPhone brought in $200.58 billion in sales for the year. It’s considered the company’s star.
• The cash cow for the company is its Mac products, notably the Macbook laptop, which is one of the most popular in this group. Sales for Mac products came in at $29.36 billion for the fiscal year (FY).
• One of the question marks for Apple was its Apple TV streaming service. This falls under the Services category. The competition in the streaming world is intense, with traditional services like Netflix, Hulu, and Disney+ dominating the market. But others like YouTube and Vimeo are also eating away at market share. Apple’s Services division earned $85.2 billion in sales in 2023.
  
• Once a darling of the company, the iPad has become a dog. Apple’s tablet continues to show low growth as sales continue to decline. Sales for the year came in at $28.3 billion in 2023, compared with $29.29 billion in 2022.
  

The Bottom Line

The BCG growth share matrix is a business management tool that allows companies to identify which aspects of their business should be prioritized and which might be jettisoned. A company’s businesses can be categorized into one of four classifications—stars, pets, cash cows, and question marks—by constructing a 2×2 table along the dimensions of growth and market share.