What Is a BCG Growth-Share Matrix?

The matrix plots a company’s offerings in a four-square matrix, with the y-axis representing the rate of market growth and the x-axis representing market share. It was introduced by the Boston Consulting Group in 1970.

Understanding a BCG Growth-Share Matrix

The BCG growth-share matrix breaks down products into four categories, known simply as dogs, cash cows, stars, and question marks. Each category quadrant has its own set of unique characteristics.

Dogs (or Pets)

If a company’s product has a low market share and is at a low rate of growth, it is considered a dog and should be sold, liquidated, or repositioned. Dogs, found in the lower right quadrant of the grid, don't generate much cash for the company since they have a low market share and little to no growth. Because of this, dogs can turn out to be cash traps, tying up company funds for long periods of time. For this reason, they are prime candidates for divestiture.

Cash Cows

Products that are in low-growth areas but for which the company has a relatively large market share are considered cash cows, and the company should thus milk the cash cow for as long as it can. Cash cows, seen in the lower left quadrant, are typically leading products in markets that are mature.

These products generally generate returns that are higher than the market's growth rate and sustain itself from a cash flow perspective. These products should be taken advantage of for as long as possible. The value of cash cows can be easily calculated since their cash flow patterns are highly predictable. In effect, low-growth, high-share cash cows should be milked for cash to reinvest in high-growth, high-share stars with high future potential.

Stars

Products that are in high-growth markets and that make up a sizable portion of that market are considered stars and should be invested in more. In the upper left quadrant are stars, which generate high income but also consume large amounts of company cash. If a star can remain a market leader, it eventually becomes a cash cow when the market's overall growth rate declines.

Question Marks

Questionable opportunities are those in high growth rate markets but in which the company does not maintain a large market share. Question marks or "problem children" are in the upper right portion of the grid. They typically grow fast but consume large amounts of company resources. Products in this quadrant should be analyzed frequently and closely to see if they are worth maintaining.

Limitations of the Matrix

One thing to note is that the matrix is a decision-making tool. This means that it does not necessarily take into account all the factors that a business ultimately must face. For example, increasing market share may be more expensive than the additional revenue gained from new sales. Because product development may take years, businesses must plan for contingencies carefully.

The BCG matrix assumes that all businesses operate independently of one another. But that isn't always necessarily true. Certain players in the market, such as dogs, may end up giving others a boost—sometimes unintentionally.

Example of a BCG Growth Matrix

There are many companies that we can apply the growth matrix to in the real world. Apple (AAPL) is a great candidate. Let's take a look at the products Apple has on the market according to the matrix categories:

• Star: iPhone
• Cash Cow: Macbook
• Question Mark: Apple TV
• Dog: iPad

In 2022, the company earned $394.33 billion in net sales, out of which almost $316.2 billion was attributed to its products section. The remaining $78.13 billion came from its services division:

• There's no doubt that the majority of Apple's sales come from its most popular product. The iPhone brought in $205.49 billion in sales for the year. In this case, it's considered the company's star.
• The cash cow for the company is its Mac products—notably the Macbook laptop, which is one of the most popular in this group. Sales for Mac products came in at $40.18 billion for the fiscal year (FY).
• One of the question marks for Apple is its Apple TV streaming service, which falls under the Services category. The competition in the streaming world is intense, with traditional services like Netflix, Hulu, Disney+ dominating the market. But others like YouTube and Vimeo are also eating away at market share. In 2022, Apple's Services division earned $78.13 billion in sales.
  
• Once a darling of the company, the iPad is now considered a dog. Apple's tablet continues to show low growth, as sales continue to decline. Sales for the year came in at $29.29 billion, compared to $31.86 billion in 2021.
  

The Bottom Line

The BCG Growth-Share Matrix is a business management tool that allows companies to identify the aspects of their business that should be prioritized and which might be jettisoned. By constructing a 2x2 table along the dimensions of growth and market share, a company's businesses can be categorized into one of four classifications: stars, pets, cash cows, and question marks.