What is BCG Matrix?
BCG Matrix, or the Growth-Share Matrix, is a framework that is used to determine the profitability of different product portfolio of the company. The profitability is generally measured against the parameters of relative growth and the market share of the product. The matrix helps the businesses determine where to put their investments for maximum profits. The BCG Matrix helps in long term strategic planning for the company.
Quadrants of BCG Matrix
The matrix can be divided into four quadrants representing different product portfolios.
1. Dogs: Products with low growth and low market share.
2. Question marks or Problem Child: Products having high growth but low market share.
3. Stars: Products having high growth and high market share.
4. Cash cows: Products having low growth and high market share.
How to use BCG Matrix?
Divide your product portfolios into the above groups and remove dogs from the product portfolio, as they drain the company resources and investment.
Invest the most on the products in the star category. Turn the question marks products into stars through successive investments and proper growth strategy. For the cash cows, the simple way ” is to milk the cow as much as possible without causing its death”. Generally, the cash cows provide the required cash to the company needed for turning question marks into stars or market leaders.
Generally, the matrix is applied in four ways:
Create: Increase the investment made in a product to increase its relative market share, like pushing from question marks to stars
Retain: If you are unable to invest more in the product, retain them in the same quadrant.
Maintain: Maintain the investment and try to get maximum cash flow from this product for investment in other categories.
Divest: Try and divest the money already trapped in a non-profitable portfolio like dogs.
The strategy is simple- to reduce the dogs ( investment traps) and problem child and increase the cash cows and stars. For drawing an effective BCG Matrix, you must have proper knowledge of the potential for market growth and potential for gaining market share for every product group. The framework is generally used with other marketing models to determine the overall investment strategy of the company.Source URL – https://myassignmenthelp.com/blog/bcg-matrix/