BCG Matrix

= Photography of the Position of The Companys Products

What is the BCG Matrix?

The BCG matrix, invented by the Boston Consulting Group, is a tool that allows to classify and evaluate the products and services of a business. It is a decision making tool in order to balance the activities of a company among those which make profits, those who ensure growth, those which constitute the future of the firm or those who are its heritage. With this tool one is able to define the development policy of the company. The matrix will position the products/services in two ways: the rate of growth of the market ; the market share of a product/service offered facing the competitors

Golden Rules
Positioning = the company has to place each of its products/services on the matrix. Thus it is able to obtain information on the market share of the product or service and the market growth. Creating long-term value = the company should have a product portfolio that includes products with high growth where it is necessary to inject cash and products where growth is weaker but which generate a lot of cash.

Stars
Strong

Question marks
Need to develop liquidity, Brings in nothing

Need investment, but emit more liquidity

Growth in market

Cash Cows
Slow

Dogs
Difficulties to survive, reduce all costs or stop the product.

Realizes a lot of liquidities, they finance other activities

Strong Market share on product

Weak

Copyright 2008 LUXINNOVATION G.I.E., The National Agency for Innovation and Research in Luxembourg

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BCG Matrix
= Photography of The Position of the Companys Products

Structure of the BCG Matrix

Question marks They do not generate profits unless the company decides to invest resources to maintain and even increase the market share (become potential stars). They have a high demand for liquidity and the company must ask the question: Invest or give up the product? Stars These are promising products for the company, they even can be considered as leaders of the industry. The strategy is to boost these products by appropriate investments to monitor the growth and maintain a position of strength. These products require a large amount of cash but also contribute to the company's profitability. They are becoming progressively cash cows with market saturation. Cash Cows These are products or services which are mature and which generate interesting profits and cash, but need to be replaced because the future growth will be lower. They must therefore be profitable because they can finance other activities in progress (including stars and question marks . Dogs These products are positioned in a declining market and highly competitive and that the company wants to get rid of soon as they become to expensive to maintain. The company must minimize the dogs . The company must decide whether it still injects liquidity, otherwise it will eliminate the dogs in the near future.

Copyright 2008 LUXINNOVATION G.I.E., The National Agency for Innovation and Research in Luxembourg

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