The ‘Stars’ can also become Cash Cows if the industry growth starts to slow down, or a newly invented technology or product outcompetes it. However, a company needs to invest a lot of cash in marketing strategies to keep this type of products alive and maintain the market dominance. These products generate stable and growing income for the company and operate in the high growth industry. The ‘Star’ segment represents the products which are best known for excellent market performance.

The horizontal axis represents market share, and the vertical axis indicates the speed of market growth.ĭepending on a product’s cash generating potential and market share, managers decide in which of the four quadrants a product will fall. The four quadrants are named as Cash Cows, Dogs, Stars and Question Marks. When applying the framework, managers draw a square diagram and divide it into four equal quadrants. This reduces the wastage of money and time investments. If a company has several brands to look after, this matrix will help the managers decide which brand they should invest in and which brands should be divested ideally. The matrix classifies a product line based on two major dimensions – a product’s competitive position in the market (relative market share) and the growth rate of the industry. The main objective of using BCG matrix is building an effective portfolio strategy. Managers use the BCG matrix to see which products have the highest potential to increase company’s profitability and which are gradually becoming company’s liabilities. For instance, if a business has a wide product portfolio, managers have to know how the different products are doing in the market so that they can wisely allocate their time and cash to the most prospective portfolio. The business tool helps companies determine the best performing product lines or businesses so that they can plan a right investment strategy.

It was developed by the Boston Consulting Group.

Boston consulting group bcg matrix