Growth Share Matrix

What it is:
A tool to help an organization identify its most profitable products: also helps to decide where to allocate resources among different product groups to maximize profits.

Its other names:
BCG Growth Matrix.

Where it comes from:
Developed in the 1970's by Bruce Henderson, an analyst with the Boston Consulting Group.

Summary:
A company's products or services can be sorted into these categories:

1. Stars are products with high market share and high growth. Often found in highly competitive product categories, Stars generate a lot of cash but require a heavy investment to stay competitive.
2. Cash Cows have high market share but slow growth. They generate stable cash flow, making it is easy to know their value. Often, they are older products that have a high market share in a slow-growing product category.
3. Dogs have low market share and slow growth. They may not demand much investment, but they sap resources that could be better deployed elsewhere.
4. Question Marks have low market share but rapid growth. Often, they are new to the marketplace and risky.

Placing products within this matrix helps pinpoint product strategies that can impact on the bottom line. Example: If a company has a large number of Dogs, it might be a good idea to sell some of them to other companies.

What else you need to know:
Remember that the above categories, though useful, do not always help tell winners from losers. Sometimes Dogs really do earn their keep, and some Stars cost more than they are worth to remain competitive. Be sure to evaluate market data and profitability before assigning a product to a category.