The Boston Consulting Group (BCG) was the inventor of this portfolio management matrix. Using this growth-share approach, a company classifies all its Strategic Business Units (SBUs).
On the vertical axis, market growth rate provides a measure of market attractiveness.
On the horizontal axis, relative market share gives an indication of the company strength in the market.
The matrix is divided into four quadrants:
1. Stars: High growth products that need heavy investment. Over time, their growth slows down turning them to cash cows.
2. Cash Cows: These are low growth, high market share products. They require less investment to hold onto their market share. For instance, products from reputed companies like J&J, P&G, etc. Cash Cows support other SBUs because of their goodwill and market share.
3. Question Marks: Low market share business units in high growth markets. Investment is needed to hold their share, building them into stars.
4. Dogs: Low growth and low market share businesses and products. They generate just enough cash to maintain themselves. They are generally on their way out.
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