BCG Matrix Model 

BOSTON CONSULTING GROUP

MATRIX ( BCG )

The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-known
portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize which
products within company product mix get more funding and attention.

The BCG matrix model is a portfolio planning model developed by Bruce Henderson of the Boston
Consulting Group in the early 1970's.

The BCG model is based on classification of products (and implicitly also company business units) into
four categories based on combinations of market growth and market share relative to the largest competitor.

BCG Matrix
The Boston Consulting Group (BCG) Approach defines four types of SBUs:
1. Stars are high-growth, high-share businesses or products requiring heavy
investment to finance rapid growth. They will eventually turn into cash cows.
2. Cash Cows are low-growth, high-share businesses or products that are established
and successful SBUs requiring less investment to maintain market share.
3. Question Marks are low-share business units in high-growth markets requiring a
lot of cash to hold their share.
4. Dogs are low-growth, low-share businesses and products that may generate
enough cash to maintain themselves but do not promise to be large sources of cash.
1-STARS
Successful question marks become stars. i.e. market leaders in
high growth industries. However, investment is normally still
required to maintain growth and to defend the leadership position.
Stars are frequently only marginally profitable but as they reach a
more mature status in their life cycle and growth slows, returns
become more attractive. The stars provide the basis for long term
Strategies in the stars
1. growth and profitability.
2. Strategic options for stars include.
3. Integration – forward, backward and horizontal
4. Market penetration
5. Market development
6. Product development
7. Joint ventures
 Characteristics
1. High growth
2. High market share
3. Need to investment to grow
4. Market leader
5. However, investment is normally still required to maintain growth

2-CASH COWS
These are characterized by high relative market share in low
growth industries. As the market matures the need for investment
reduces.

Cash Cows are the most profitable products in the

portfolio. The situation is frequently boosted by economies of scale
that may be present with market leaders.

Cash Cows may be used to fund the businesses in the other three quadrants.
It is desirable to maintain the strong position as long as possible
and strategic options include.

1-Product development
2-Concentric diversification
If the position weakens as a result of loss of market share or
market contraction then options would include..
Retrenchment (or even divestment)

Characteristics
1-high relative market share
2- low growth industries.
3- Cash Cows are the most profitable products in the
Portfolio
4- boosted by economies of scale

3-QUESTION MARKS
These are products or businesses, that compete in high growth
markets but where the market share is relatively low. A new
product launched into a high growth market and with an existing
market leader would normally be considered as a question mark.
Because of the high growth environment, they can be a “cash
sink”.

Strategic options for question marks include..

1-Market penetration
2-Market development
3-Product development
Which are all intensive strategies or divestment.

Characteristics
1-Investment should be made in question marks
2-product waiting any chance to grow up to be stare
3-high growth markets
4-Low market share
5- A new product launched into a high growth market

4-DOGS
These describe businesses that have low market shares in slow
growth markets. They may well have been Cash Cows. Often they
enjoy misguided loyalty from management although some Dogs
can be revitalised. Profitability is, at best, marginal.
Strategic options would include..

1-Retrenchment (if it is believed that it could be revitalised)

Liquidation
2-Divestment (if you can find someone to buy!)
3-Successful products may well move from question mark though
star to Cash Cow and finally to Dog. Less successful products that
never gain market position will move straight from question mark to
Dog.
Characteristics
1-low market shares
2-low growth markets.

Summary of The BCG is simple and useful technique for strategic analysis. It is
1-convenient for multi-product or multi-divisional companies. It focuses on cash
flow and is useful for investment and marketing decisions.

2-One should not however, ignore the limitations of the technique.

Definition (qualitative and quantitative) of the market is
sometimes difficult.
 3-It assumes that market share and profitability are directly
related.

4-The use of high and low to form four categories is too

simplistic.

5-Growth rate is only one aspect of industry attractiveness and

high growth markets are not always the most profitable.

6- It considers the product or business in relation to the largest

player only. It ignores the impact of small competitors whose
market share is rising fast.

7-Market share is only one aspect of overall competitive

position.
It ignores interdependence and synergy.
Companies will frequently search for a balanced portfolio, since.
Too many stars may lead to a cash crisis
Too many Cash Cows puts future profitability at risk
And too many question marks may affect current profitability.

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BCG STARS (high growth, high market share)

- Stars are defined by having high market share in a growing market.

- Stars 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.

 BCG QUESTION MARKS (high growth, low market share)

- These products are in growing markets but have low market share.
- Question marks are essentially new products where buyers have yet to discover them.
- The marketing strategy is to get markets to adopt these products.
- Question marks have high demands and low returns due to low market share.
- These products need to increase their market share quickly or they become dogs.
- The best way to handle Question marks is to either invest heavily in them to gain market share or to
sell them.

BCG CASH COWS (low growth, high market share)

- Cash cows are in a position of high market share in a mature market.

- If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of
cash flow.
- Because 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 businesses strive for.

BCG DOGS (low growth, low market share)

- Dogs are in low growth markets and have low market share.
- Dogs should be avoided and minimized.
- Expensive turn-around plans usually do not help.

And now, let's put all this into a picture:

Are there any problems with the BCG matrix model?

Some limitations of the BCG matrix model include:

The first problem can be how we define market and how we get data about market share
A high market share does not necessarily lead to profitability at all times
The model employs only two dimensions – market share and product or service growth rate
Low share or niche businesses can be profitable too (some Dogs can be more profitable than cash Cows)
The model does not reflect growth rates of the overall market
The model neglects the effects of synergy between business units
Market growth is not the only indicator for attractiveness of a market

There are probably even more aspects that need to be considered in a particular use of the BCG model.
 ‫اصدار ثالث‬
BCG Matrix
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help
with long-term strategic planning, to help a business consider growth opportunities by
reviewing its portfolio of products to decide where to invest, to discontinue or develop
products. It's also known as the Growth/Share Matrix.

The BCG matrix model is divided into 4 quadrants derived from market growth and relative
market share: Stars, Cash Cows, Question Marks and Dogs.

Stars (high share and high growth)

Products in the star quadrant are in a market that is growing quickly and one where the
product(s) have a high market share. Products in the stars quadrant are market-leading
products and require significant investment to retain their market position, boost growth,
and maintain a competitive advantage.
Stars consume a significant amount of cash but also generate large cash flows. As the
market matures and the products remain successful, stars will migrate to become cash
cows. Stars are a company’s prized possession and are top-of-mind in a firm’s product
portfolio.

Cash Cows (high share, low growth)

Products in the cash cows quadrant are in a market that is growing slowly and where the
product(s) have a high market share. Products in the cash cows quadrant are thought of as
products that are leaders in the marketplace. The products already have a significant
amount of investments in them and do not require significant further investments to

maintain their position.

Cash flows generated by cash cows are high and are generally used to finance stars and
question marks. Products in the cash cows quadrant are “milked” and firms invest as little
cash as possible while reaping the profits generated from the products.
Dogs (low share, low growth)

Product classified as dogs always have a weak market share in a low-growth market.
These products are very likely making a loss or a very low profit at best. These products
can be a big drain on management time and resources. The question for managers is
whether the investment currently being spent on keeping these products alive could be
spent on making something that would be more profitable. Firms typically phase out
products in the dogs quadrant unless the products are complementary to existing products
or are used for a competitive purpose.

Question Markets (low share, high growth)

Products in the question marks quadrant are in a market that is growing quickly but where
the product(s) have a low market share. Question marks are the most managerially
intensive products and require extensive investment and resources to increase their market
share. Investments in question marks are typically funded by cash flows from the cash cow
quadrant.

In the best-case scenario, a firm would ideally want to turn question marks into stars. If
question marks do not succeed in becoming a market leader, they end up becoming dogs
when market growth declines

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BCG Matrix
Huawei is Well-Positioned for Global Growth
Huawei has established a B2B foundation in every major region through partnerships & direct
investment and is now beginning to leverage these local market learnings & partnerships to boost
the B2C side of their business.
They are also well-positioned for the future because of their R&D and leadership in 5G, which is
widely accepted as the future of telecommunications network infrastructure.
The journey from being the only Chinese company (out of 91 other companies listed on the
Fortune Global 500 list) to generate more revenues overseas than in China (2005), to becoming the
top 2 global market leaders in 2019 surpassing Apple, Huawei has created a milestone. It has been
successful to mark its position keeping up with the dynamic environment and market
(customers) needs.
 3 main SBUs of Huawei
Huawei’s main business for 2018 has been the consumer business. The business rose 45.1 % and
helped Huawei accumulate $52 billion and accumulates for 48.4 % of the revenue, with the carrier
business accumulating $43.8 billion and 40.8 % of the revenue but this segment dropped by 1.3 %.
Enterprise business fills up the remaining 10.3 % of the revenue

The position of Huawei's SBUs is in the Star , it represents a high market share and a high market
growth rate, which means it has a high competition. So, the concentration and investment needs to
be high in marketing activities so as to increase and retain market share. According to that, we can
apply the strategy of vertical integration, horizontal integration, market penetration, market
development and product development.