BCG Matrix

The simple 2×2 chart that reveals your company’s future

Stop wasting resources on losing products. Learn how to use the BCG Matrix to analyze your business portfolio, make smart investment decisions, and fuel profitable business growth.

Introduction: Are you investing in the right places?

As a business grows, it’s easy to lose focus. You have multiple products or services, all of which demand time, money, and attention. But are they all contributing equally to your success? The hard truth is, some of your products are likely draining resources while others have untapped potential.

Making smart decisions about where to invest is a core part of strategic marketing.

According to a study by the Boston Consulting Group, companies with disciplined portfolio management achieve 4 to 5 percent higher shareholder returns annually.
As Philip Kotler discusses in “Marketing Management,” a key task for any leader is to manage their business portfolio, deciding which units to build, maintain, harvest, or divest.

The BCG Matrix is a simple yet powerful tool designed to give you that clarity. It helps you see your business as an investor would, ensuring you put your resources where they will generate the best returns.

What is the Boston Consulting Group (BCG) Matrix?

The BCG Matrix (or Growth-Share Matrix) is a framework used to visualize a company’s portfolio of products or business units. It plots each product on a 2×2 grid based on two key factors:

Relative Market Share: How strong is your product’s position in the market compared to your largest competitor? (High or Low)
Market Growth Rate: How fast is the overall market for this product growing? (High or Low)

This simple analysis helps you identify which products are draining your resources and which are driving your growth, allowing you to make much smarter strategic decisions.

The 4 quadrants of the BCG Matrix explained

Each quadrant of the matrix represents a different type of product with a specific strategic recommendation.

1. Stars (High Growth, High Market Share)

These are your rising champions in a fast-growing market. They generate strong revenue but require heavy investment to maintain their lead.

Modern Example: NVIDIA’s AI Chips. They are leaders in the booming AI market and require massive R&D investment to stay ahead.
Strategy: Invest. Fund these heavily to solidify their position so they can become your future Cash Cows.

2. Cash Cows (Low Growth, High Market Share)

These are mature, stable market leaders that generate more cash than they consume.

Modern Example: Google Search. It dominates its market, which is now mature, and its high profits fund Google’s other ventures (its “Question Marks”).
Strategy: Harvest. Minimize investment, maximize efficiency, and use the profits to fund your Stars and promising Question Marks.

3. Question Marks (High Growth, Low Market Share)

These are the wild cards in a high-growth market. They have the potential to become Stars, but they consume a lot of cash and have an uncertain future.

Modern Example: Meta’s Metaverse division (Reality Labs). It’s in a potentially high-growth market but is losing billions and has yet to capture a dominant share.
Strategy: Analyze. Decide whether to invest heavily to gain market share or to divest if you don’t see a clear path to leadership.

4. Dogs (Low Growth, Low Market Share)

These are products with a weak position in a low-growth market. They typically generate low profits or even losses.

Modern Example: Physical DVD players. The market is shrinking, and they hold very little market share compared to streaming services.
Strategy: Divest. The standard advice is to phase out or sell these products to free up resources for more promising ventures.

A founder’s 3-step guide to using the matrix

List Your Products: List all of your products, product groups/categories or business units.
Plot Them on the Matrix: For each product, determine its relative market share and the market’s growth rate. Place it in the corresponding quadrant.
Apply the Strategy: For each product, apply the recommended strategy (Invest, Harvest, Analyze, or Divest) to create a clear action plan for your business.

Final thoughts

The BCG Matrix is more than just a theoretical model; it’s a tool for ruthless prioritization. It forces you to look at your business objectively and confront the hard truths about which of your products are truly creating value and which are holding you back.

By using this framework, you can ensure your limited resources, your time, your money, and your team’s energy are always focused on the opportunities with the greatest potential for profitable growth.

Ready to apply the BCG Matrix to your own business? Start by downloading our Excellent Business Plans to map out your product portfolio and build a clear action plan.

Frequently Asked Questions (FAQs)

Is the BCG Matrix still relevant today?
Yes. While some critics argue it’s too simple for complex modern markets, it remains an incredibly useful tool for a quick, high-level portfolio analysis, especially for businesses with multiple product lines.
How do I accurately measure “Market Share” and “Market Growth”?
For a small business, this can be an estimate. Market Growth can be found in industry reports. Relative Market Share can be estimated by comparing your sales to your top competitor’s sales.
What are the limitations of the BCG Matrix?
Its main limitation is its simplicity. It doesn’t account for synergies between business units (e.g., a “Dog” that helps sell a “Star”) or other important factors like brand loyalty and team strength. Use it as a conversation starter, not a final verdict.
How often should I do a BCG analysis?
A full portfolio analysis should be done annually as part of your strategic planning process.