BCG MATRIX MODEL

In marketing, the BCG matrix or BCG model is one of the most famous portfolio management
tools used in product life cycle theory
theory.. This portfolio planning model was developed by Bruce
Henderson of the Boston Consulting Group in the early 1970’s.
BCG model is often adopted to prioritize the funding and attention to various products in
company product mix. It helps classify the products or service and company business units into
four categories, based on combinations of market growth and market share relative to the largest
competitor.

1. Stars
as the Stars in BCG Matrix have high market share in a growing mar
market,
ket, they are the leaders in
the business but still need a lot of support for promotion a placement.
If market share is kept, Stars are likely to grow into cash cows.

2. Question Marks
Products or service of this kind are in the position of the growing mar
markets
kets but they have low
market share.
Usually, Question Marks essentially refer to new products that customers have yet to discover.
According marketing strategy for this kind of products or services is to get the markets to adopt
them. Due to the low markett share, the Question Marks in BCG Matrix have high demands and
low returns. These products need to increase their market share quickly or they become dogs.
The best approach to handle Question Marks is to either invest heavily in them to gain market
share or to sell them.

3. Cash Cows
Cash cows are in a position of high market share in a mature market. If competitive advantage
can be achieved, cash cows have high profit margins and generate a lot of cash flow.
As a result of the low growth, promotion and placement investments are low. Investments into
supporting infrastructure can improve efficiency and increase cash flow more. Cash cows are the
products that various kinds of businesses are striving for.

4. Dogs
In BCG model, Dogs are defined by being in the low growth markets and having low market
share. They should be avoided and minimized, as usually even expensive turn-around plans
won’t help much.

LIMITATIONS OF BCG MATRIX MODEL

As any other marketing theories in the field, the BCG matrix model is not perfect either. There
are according problems of this theory.
Some limitations concerning the particular use of BCG include:
1. Only two dimensions – market share and product or service growth rate, are employed. These
are the first limitations.
2. How to define market and how to get data about market share are also problems.
3. High market shares don’t always necessarily lead to profit at all times. It is not the only
success factor.
4. Low share or niche businesses can be profitable too, which means in the real world some
Dogs can be more profitable than cash Cows.
5. The model cannot reflect the growth rates of the general market and market growth is not
the only indicator for market attractiveness.
6. The model also neglects the effects of synergy between different business units.