While first created to manage product lines for manufacturing companies in the ‘60s and ‘70s, it’s equally relevant for tech startups that offer a variety of digital services. Companies use the framework to decide which businesses or products to invest in to maximize growth potential and profitability. The different categories help you simplify complex decision-making about investment and business focus. Question marks: Currently low market share in a fast-growing market.Dogs (or pets): Low market share in a market with a slow growth rate.Cash cow: High market share in a mature market.Stars: High market share in a high-growth market.

Market growth rate: The rate at which a certain market grows in revenues compared to the previous year.īased on these two metrics, you divide your company’s businesses or products into four categories:.Relative market share: Your share of the market compared to your largest competitor.To help you roughly estimate the profitability of a business, the matrix uses the two metrics of relative market share and market growth rate.

It divides a company’s business units into categories based on their respective market shares and market sizes. The Growth Share Matrix, also known as the BCG Matrix, is a portfolio management framework developed by the Boston Consulting Group’s founder in 1968. This is why the matrix highlights the level of cash consumption required versus the resulting cash generation.BCG Matrix definition: What is a Growth Share Matrix? Equally, it assumes that to establish a product in a growing market will require continual investment to produce the goods/services and to increase capacity. The underlying foundation of Bruce Henderson's model is that an increase in market share will result in an improvement in cash generation. The x-axis generally denotes the market growth rate, or cash usage - with the y-axis denoting relative market share, or cash generation.īruce Henderson reasoned that established and mature areas of a business where required to generate significant income (cash cows) which could then be invested into new highly profitable market leading products (stars). The matrix is scored from low to high on both the x-axis and y-axis. The quadrants are split into combinations of 'market growth' and 'market share', hence also being known as the growth-share matrix or growth-market-share matrix. The concept is based on four quadrants in which a company's strategic business units (SBU) or products/brands are classified. Devised as a portfolio planning tool, or corporate planning tool, the BCG growth-share matrix was first conceived by Bruce Henderson of the Boston Consulting Group back in the 1970's.

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