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What is a BCG matrix? The Boston consulting group, also known as the product portfolio matrix, is used to evaluate a business’s long term strategic position in its portfolio.
A brand portfolio is where small groups of brands come under a large umbrella brand. Like the brand, Nestle has several groups of brands under it like- L’oreal, Garnier, Nestea and many more.
What is a BCG matrix?
A BCG matrix is an analysis tool used by businesses to identify their product’s values; it is essentially used in the decision-making process of what goods/services to continue selling and which ones to eliminate.
The BCG growth matrix is divided into 4 categories:
1.Dogs- The products that have low market shares and are growing at a very low rate, come under this category. This means that they generate little to no profits for the business and that they should be made redundant.
Products that are in the declining stage of their product life cycle also come under this category. Dogs are liquidated meaning their manufacturing is stopped and the ones in stock are sold quickly, the resources used to make these products are then reallocated.
2.Cash Cows- These are the products that have a low rate of growth, but they are a huge market share, so the business just takes whatever profit it can by delivering the products. The products in the cash cows category are usually in their mature state in the product’s life cycle, once that changes to decline, they will be a part of the dog’s category.
3.Stars- The products that are in the growth stage of the product life cycle come under this category. If a product is in the stars category, then that means it has a significant market share and that the investors should be interested in investing in the business or that particular product.
Stars bring huge profits to the business, but their costs are also high, this is because the level of competition is increasing, other businesses copy the star products and so the business needs to develop the product and marketing strategies ever so often to be a star always.
Once a star has stopped growing and is still a holder of significant market share, it becomes a cash cow for the business.
4.Question marks- A New business venture’s products are question marks, they have a low market share but their market growth is high. After some time of continued high growth rate, these question marks can turn into stars.
On the other hand, if a question mark’s growth starts reducing, then over time it will be considered a dog, this is the reason why question marks are always thoroughly researched by the investors, and if they succeed in the tests, only then they are compelled into investing in the business/ product.
Uses in Marketing
- Hold- When the product is in the cash cow category, the matrix can be used to keep the product in its current position, especially when the business does not have enough money to invest in a marketing campaign to boost its sales.
- Build- when the product is in question marks or star stage, and the business can invest money, it can be used to carry out research and development of the product and market campaigns can be carried out to lengthen the product’s profitable stage.
- Harvest- The products in the cash cows stage are ‘milked’, meaning maximum profit is achieved while the products can provide profitability.
- Dispose of- When the products no longer profit the business, they can be disposed of/sold/ reused to make other products, this way resources are used efficiently.
- Helps the businesses in understanding their current as well as future competitors.
- The business can improvise their products
- Remove the unnecessary goods/services that bring them losses
- Identify future expansion opportunities.
Examples
Brands | Question Marks | Stars | Cash Cows | Dogs |
Nestle | Fanta | Thums up; Nescafe(coffee) | Limca; Maggi | Minute Maid |
Apple | apple tv | iPhone 13; apple watch | MacBooks | iPhone 5 |
McDonald’s | Mc Flurry(ice cream) | big macs; chicken McNuggets | French Fries | Apple pie |
Conclusion
The BCG matrix is a tool used by businesses to analyse their products, it is done to review their performances in the market and the amount of market share that they have captured. When a product is unable to provide any more profits to a business according to BCG analysis, then it is disposed of so that the resources can be reallocated and used more efficiently. The BCG growth matrix is divided into 4 parts – Dogs, Cash Cows, Stars and Question Marks; the future of the products depends on the position they hold in these categories and the market.
