case study on bcg matrix application

Best 10 BCG Matrix Examples for Students

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BCG Matrix is an apparatus utilized to incorporate methodology to break down specialty units or product offerings dependent on two factors: relative piece of the overall industry and the market development rate. By joining these two factors into a matrix, an organization can plot their specialty units as needs are and figure out where to dispense extra (financial) assets, where to money out, and where to strip.

The primary reason for the BCG Matrix is accordingly to settle on speculation choices on a corporate level. Contingent upon how well the unit and the business are doing, four different classification names can be credited to every group:

• Question Marks

This article covers every classification and how to utilize the BCG Matrix appropriately.

10 Examples of BCG Matrix (of famous companies)

The BCG Model depends on items as opposed to administrations, be that as it may, it applies to both. You could utilize this if checking on a scope of items, particularly before growing new ones. Here are the example list:

1. BCG Matrix of Coca-Cola

A world-driving ready-to-drink refreshment company, Coca-Cola Company has more than 500 soda pop brands, from Fuse Tea to Oasis to Lilt to Powerade. Yet, none of them is anyplace near the coke brand in terms of mindfulness, income, and benefit.

Stage 1. Choose the Product/Firm/Brand

We pick the firm Coca-Cola for investigation. Also, you need to identify the market, as the picked market is beverages, diet cokes, and mineral water.

Stage 2. Calculate Relative Market Share & Find out the Market Growth Rate

By and tremendous Growth rate in Coke is that it is no: in more than 200 countries.

Stage 3. Draw the Circles on a Matrix

2. BCG Matrix of Samsung

Stage 1. choose the product/firm/brand.

We pick the firm Samsung for investigation.

The picked market is the consumer electronics industry which incorporates smartphones, computers, tablets, etc.

Stage 3. Calculate Relative Market Share

By and tremendous Growth rate in Samsung home appliances by making 60% of the sales.

Stage 4. Draw the circles on a matrix

3. BCG Matrix of L'Oréal

We pick the firm L'Oréal for investigation.

Stage 2. Identify Market

The picked market is the Cosmetics Industry, which essentially incorporates Skincare, Makeup, Haircare, Hair shading, and Fragrances.

Stage 4. Find out the Market Growth rate

By and tremendous Growth rate in Cosmetics Industry (starting at 2018) = 4.8%

Stage 5. Draw the circles on a matrix

Note: Just follow the above pattern with every example and BCG matrix you will be making for your class.

4. BCG Matrix of PepsiCo

5. BCG Matrix of Apple

6. BCG Matrix of Nestle

7. BCG Matrix of Unilever

8. BCG Matrix of McDonalds

9. BCG Matrix of KFC

10. BCG Matrix of Amazon

What is BCG Matrix?

The Boston Consulting Group's item portfolio matrix ( BCG matrix ), otherwise called the Growth/Share Matrix, is a vital arranging device that enables a business to consider development openings by inspecting its arrangement of items to choose where to contribute to suspend or create things. It's otherwise called the Growth/Share Matrix. The Matrix is separated into four quadrants dependent on an investigation of market development and the relative peace of the overall industry.

It depends on the mix of market development and the overall industry comparative with the following best contender.

High Growth, High Market Share

Star units are pioneers in the classification. Items situated in this quadrant are appealing as they are located in a hearty class, and these items are exceptionally serious in the classification.

2. Question Marks

High Growth, Low Market Share

Like the name proposes, the future capability of these items is dubious. Since the development rate is high here, with the correct systems and ventures, they can become Cash cows and, at last, Stars if they have a flat piece of the overall industry so that off-base ventures can downsize them to Dogs significantly after loads of speculation.

3. Cash Cows

Low Growth, High Market Share

In the long run, if you are working for quite a while working in the business, advertising development may decay, and incomes deteriorate. At this stage, your Stars are probably going to change into Cash Cows. Since they despise everything that has a substantial relative piece of the overall industry in a deteriorating (developed) market, benefits and cash streams are relied upon to be high. As a result of the lower development rate, ventures required ought to likewise below. Along these lines, cash cows ordinarily produce cash in an overabundance of the measure of money expected to keep up the business. This 'overabundance cash' should be 'drained' from the Cash Cow for interests in different specialty units (Stars and Question Marks). Cash Cows eventually carry parity and security to a portfolio.

Low Growth, Low Market Share

Dogs hold a flat piece of the overall industry contrasted with contenders. Neither do they create cash, nor do they require huge cash. As a rule, the resources are not worth putting into because they create low or negative cash returns and may need enormous entireties of money to help. Because of the flat piece of the pie, these items face cost inconveniences.

How to Make a BCG Matrix Diagram?

So far, we realize products are ordered in four sorts. Presently we will see on what premise and how that order is done. We will comprehend the five procedures of improving a BCG matrix by making one for L'Oréal in the areas to follow.

Stage 1. Choose the Product

BCG matrix can be utilized to operate Business Units, separate brands, products, or firms as a unit itself. The decision of the group impacts the entire investigation. Along these lines, characterizing the unit is essential.

Stage 2. Define the Market

A mistakenly characterized market can prompt a weak characterization of products. For instance, if we investigate Daimler's Mercedes-Benz vehicle brand in the traveler vehicle market, it would wind up as a dog (it holds under 20% relative market share). However, it would be a cash cow in the extravagant vehicle market. Characterizing the market is a significant pre-imperative for a better understanding of the portfolio position.

Stage 3. Calculate the Relative Market Share

Market share is the level of the entire market taken into account by your company, estimated either in income terms or unit volume terms.

We utilize Relative Market Share in a BCG matrix, contrasting our product deals and the main adversary's sales for a similar product.

Relative Market Share = Product's business this year/Leading opponent's business this year

For instance, if your rival's market share in the vehicle business was 25% and your association's image market share was 10% around the same time, your relative market share would be just 0.4. The relative market share is given on the x-axis.

Stage 4. Find out the Market Development Rate

The business development rate can be effortlessly found through free online sources. It can likewise be determined by deciding the healthy income development of the leading firms. The market development rate is estimated in rate terms.

Market development rate was typically given side-effects (business this year – Product's business a year ago)/Product's business a year ago.

Markets with high development are ones where the total market share accessible is growing, so there are a lot of chances for all organizations to bring in cash.

Stage 5. Draw the Circles on a Matrix

Having determined the above measures, you have to plot the brands on the Matrix simply on EdrawMind desktop version. It has the premade templates for BCG. All you have to do is put up the data just like we did with every example.

The x-axis shows the relative market share, and the they-pivot shows the business development rate. You can plan a hover for every unit/brand/product, the size of which ought to relate to the extent of income created by it in a perfect world.

Taken these variables together, you can attract the perfect way to follow the BCG Matrix, from start-up to market pioneer. Question Marks and Stars should be financed with ventures produced with Cash Cows. What's more, Dogs should be stripped or exchanged to let loose cash with minimal potential and use it somewhere else. At long last, you will require a reasonable arrangement of Question Marks, Stars, and Cash Cows to guarantee positive cash streams later on.

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Understanding BCG Matrix

Strategic analysis is crucial in the world of finance, helping professionals make informed decisions to drive growth and maximize returns.

One such tool that has stood the test of time is the BCG Matrix . Developed by the Boston Consulting Group , this matrix offers a systematic approach to analyzing a company's portfolio of products or business units.

In this article, we will delve into the intricacies of the BCG Matrix, explore its components and quadrants, and discuss how it can be applied to make strategic decisions in the finance industry.

What is the BCG Matrix?

The BCG Matrix, also known as the Growth-Share Matrix, is a visual representation of a company's portfolio of products or business units . It was developed by the Boston Consulting Group in the 1970s and is widely used across industries to assess the strategic position of different offerings.

By plotting products or units on a matrix based on their market growth rate and relative market share, the BCG Matrix provides valuable insights into the potential and profitability of each element in the portfolio .

Components of the BCG Matrix

Market Growth Rate

The market growth rate refers to the rate at which a particular market is growing . It is an important factor to consider when analyzing a company's portfolio because high-growth markets tend to offer greater opportunities for expansion and profitability. By assessing the market growth rate, finance professionals can identify industries or sectors with significant growth potential and allocate resources accordingly.

Relative Market Share

Relative market share is a measure of a company's market share compared to its competitors in a specific market . It provides insights into a company's competitive position and its ability to capture a significant portion of the market. A high relative market share indicates a strong market presence, which can lead to economies of scale, pricing power, and competitive advantages.

Quadrants of the BCG Matrix

The BCG Matrix divides the portfolio into four quadrants, each representing a different strategic outlook. Let's explore each quadrant:

Stars represent products or business units with a high market growth rate and a high relative market share . These are the growth drivers of a company's portfolio. Stars require substantial investment to sustain their growth trajectory and capture the market's potential. While they generate revenue, they also consume resources to fuel their expansion. Companies should develop strategies to support and maximize the potential of stars, as they can become future cash cows.

For example Tesla's electric vehicles (EVs) in the early 2010s. With a high market growth rate and a dominant market share in the electric vehicle industry, Tesla was considered a star. The company invested heavily in expanding its manufacturing capacity and charging infrastructure to capitalize on the growing demand for EVs.

Cash cows are products or business units with a low market growth rate but a high relative market share . These offerings have reached maturity and generate significant cash flow for the company. Cash cows typically have established customer bases and enjoy economies of scale, resulting in healthy profit margins. Finance professionals should focus on sustaining and extracting value from cash cows to fund other areas of the business .

Example Microsoft's Office Suite. Although the market growth rate for office productivity software is relatively low, Microsoft's Office Suite dominates the market with a high relative market share. This product line generates substantial revenue and profit, which supports the company's investments in other emerging areas, such as cloud computing.

Question Marks (Problem Children)

Question marks, also known as problem children or wildcards, are products or business units with a high market growth rate but a low relative market share . They require careful analysis and strategic decision-making due to the uncertainty surrounding their potential. Question marks may either become stars or fail to gain market traction. Companies need to assess the viability and potential of question marks and allocate resources accordingly.

Example: Uber's food delivery service, Uber Eats, during its early years. With the rapid growth of the food delivery market, Uber Eats had a high market growth rate. However, it faced intense competition from established players like DoorDash. Uber had to strategically invest in marketing and partnerships to gain market share and compete effectively.

Dogs represent products or business units with both a low market growth rate and a low relative market share . These offerings have limited potential and may not generate substantial returns. Companies should evaluate dogs to determine if they can be revitalized or if divestment is a more appropriate course of action.

Example: BlackBerry's smartphones in the mid-2010s. With declining market share and a lack of innovation compared to competitors like Apple and Samsung, BlackBerry's smartphones became dogs in the market. The company eventually shifted its focus to software and services.

Analyzing and Applying the BCG Matrix

To conduct a BCG Matrix analysis, finance professionals should follow these steps:

Gather relevant data and information, such as market growth rates and market shares .

Plot the products or business units on the matrix based on their market growth rate and relative market share.

Interpreting the results and making strategic decisions involves:

Identifying resource allocation priorities based on the quadrant placement.

Developing growth strategies for stars and question marks.

Considering divestment or restructuring options for dogs.

Maximizing the potential and profitability of cash cows.

By applying the BCG Matrix, finance professionals can make informed decisions that optimize resource allocation, drive growth, and enhance overall portfolio performance.

Limitations and Considerations

While the BCG Matrix is a valuable tool, it has some limitations:

The matrix focuses solely on two dimensions (market growth rate and relative market share), neglecting other factors such as competitive dynamics, industry trends, and external factors.

The matrix assumes that a high market share leads to profitability, which may not always hold true.

Industries with different characteristics may require modifications to the matrix for accurate analysis.

Finance professionals should complement the BCG Matrix with other analytical tools and consider the specific context of their industry and market to gain a comprehensive understanding of their portfolio.

Case Study: Application of the BCG Matrix

Let's consider a hypothetical case study to illustrate the application of the BCG Matrix.

Company X operates in the technology industry and has a diverse portfolio of products. After conducting a BCG Matrix analysis, the company identifies the following:

Product A: High market growth rate, high relative market share (star)

Product B : Low market growth rate, high relative market share (cash cow)

Product C: High market growth rate, low relative market share (question mark)

Product D: Low market growth rate, low relative market share (dog)

Based on this analysis, Company X develops strategies to further invest in Product A to maintain its growth trajectory, sustain Product B to continue generating cash flow, evaluate potential opportunities for Product C, and consider divestment or restructuring options for Product D.

The BCG Matrix is a powerful tool for strategic analysis in finance. By analyzing a company's portfolio based on market growth rate and relative market share, finance professionals can make data-driven decisions to allocate resources effectively, identify growth opportunities, and maximize profitability.

The BCG Matrix provides a structured framework for evaluating products or business units and helps finance professionals navigate the complexities of portfolio management.

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Table of Content

• What is the BCG Matrix?
• Importance of BCG Matrix
• Application of BCG Matrix
• Example of application of BCG Matrix

Introduction to BCG Matrix

Boston Consulting Group’s Growth and Market Share Matrix is one of the important strategic planning tools that can be used by the organization to provide a graphic representation of the products and services of the organization and to decide what the organization should own, sell and invest in. This Matrix is mainly used by the management team of the company to assess the current state of the product and service offering of the company. This is also known as the Growth/ Share Matrix as this Matrix has the four-quadrant based on analysis of the market growth and market share. In this Matrix the product or service offering of the company are plotted in four different categories which include "Dogs," "Cash Cows," "Stars," And “Question Marks.

The need for the BCG Matrix

The BCG Matrix is used to assess the current state of the product lines and service offerings of the organization. By using this model, the organization can also determine the product lines that the organization should keep, sell and invest in. The use of this strategic planning model can also help the organization to better allocate the resources across its business units. This model is mainly used by large-scale organizations that have diversified product portfolios and need to assess the market share and growth prospects of different product lines. In addition, the BCG Matrix also provides a view on the available opportunities for the current product portfolio by understanding which business should the company invest in, which business needs harvesting, which business needs to be completely shut down, and which business needs divesting.

How to apply the BCG Matrix?

Before moving on to the real example of BCG Matrix, let us discuss How to use the BCG Matrix for strategic planning?

To use the BCG Matrix, the organization first needs to review the portfolio of the products, services, and strategic business units of the organization. Then, the organization needs to prepare the BCG Matrix template and consider the four different quadrants covered in the BCG Matrix. The four different quadrants include "Dogs," "Cash Cows," "Stars," And “Question Marks.

• The “Stars” category depicts the products or brands that have fantastic opportunities and can generate higher ROI due to higher market share, growth market, and cash generation capacity. The strategy that can be adopted by the organization for this category of products is to hold these products and invest in the marketing of these products to ensure higher market share and growth.
• The “Question marks” category includes the products that can attain higher growth but currently, the market of such products is uncertain – whether it will grow or decline. Also, the cash used in this category is high due to higher market growth, lower market share, etc. The key strategy available to the organization, in this case, is to build in the manner that helps to transform the new entry products into the higher market share products.
• The “Cash Cows” category includes products that are well-established and consistently produce cash through a higher market share in the low growth markets.
• The last category includes the “Dogs” category which includes the products that have little or no value as these products have low market growth as well as low market share. These products do not generate higher cash and thus, do not require higher investment. Thus, the key strategy that can be adopted for these products is to divest the product altogether or improve the product demand through innovation and rebranding.

After considering all the four quadrants, the organization needs to list and allocate its products on the basis of the market growth, market share, and cash generation or usage factor. After proper allocation of the products, the organization can then determine the strategies that can be adopted by considering the products that need investment and that need to be diversified.

BCG Matrix real example

Coca-Cola is an American MNC that has a product portfolio of more than 3500 beverages under 500 brands. For better understanding, let's prepare the Coca Cola BCG Matrix and see which products of Coca-Cola fall under which quadrant.

The Cash Cows include a product that is not in the growth industry but delivers a higher market share. Coke has been in the market for years and has achieved a leading position in the market in terms of the carbonated soft drink segment. Coke is also a major revenue-generating product for the company.

The Stars include the products and business units that attain a higher market share in the high-growth industry. The Kinley and Dasani water of Coca-Cola falls in this category as bottled water is becoming an ever-evolving and demanding product in the international market. Coca-Cola has the opportunity to hold Dasani and Kinley water bottles and invest in the marketing and advertising of these products to ensure higher market share and growth.

Question Mark

The products in the Question Mark category have a smaller market share even in the expanding market. Can you guess any product of Coca that is in the expanding industry but has a smaller market share? Some of these products are Minute Maid, Diet Coke, Smartwater, Sparkling water, Honest Tea, etc. There is huge potential for these products in the market due to rising health consciousness among the customers which suggests that Coca-Cola should either exit these products or invest in advertising, product quality improvement, and other features to ensure higher customer attractiveness.

Dogs category includes products that have lower growth potential and do not have a higher market share. Can you think of any Coca-Cola product or brand that is in this category? Maybe not. Have you heard about Zico Coconut Water? Coca-Cola can discontinue this product as this is the least profit-generating product for the company with a very low market share.

Hence, the use of the BCG Matrix provides insight into the current state of the organization's products in the industry which then helps the organization to engage in strategic planning and determine which products the organization should hold, divest, invest or sell.

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Mastering the BCG Matrix: Practical Examples and Usage Guide

• Ossian Muscad
• July 18, 2023
• No Comments

Last Updated on July 18, 2023 by Ossian Muscad

The BCG Matrix is a tool businesses use to analyze their product portfolios and assess the relative performance of each offering. This matrix helps organizations identify which products are growing quickly, which are stable and mature, and which should be divested or have resources reallocated. It also provides insight into how different products interact within an organization’s portfolio. This article will discuss the basics of the BCG Matrix, provide practical examples of its usage, and offer advice on how you can use it to improve your decision-making processes.

What is the BCG Matrix?

The BCG Matrix, short for Boston Consulting Group Matrix, is a valuable tool employed in strategic management. It aids organizations in scrutinizing their diverse product offerings. This matrix segregates a company’s products or services into four distinct categories: Stars, Cash Cows, Question Marks, and Dogs. Each category signifies a different degree of market share and potential for growth.

The BCG Matrix serves as a guide for businesses to make informed decisions about their product portfolio. With its help, they can strategically allocate resources, determine investment priorities, and decide which products should receive more investment or be divested. However, it’s crucial to note that the BCG Matrix is one instrument among many in the toolbox of strategic analysis and should be used in conjunction with other tools for a comprehensive evaluation.

Brief History of the BCG Matrix

The BCG Matrix was developed in the 1970s by Bruce Henderson, the founder of the Boston Consulting Group. He designed this matrix as a comprehensive portfolio planning tool to assist companies in evaluating their product lines, enabling them to make informed decisions on which products to invest further in and which to divest from. The concept is built around four quadrants, categorizing a company’s Strategic Business Units (SBUs).

Henderson’s model operates on the premise that an increase in market share will result in increased cash generation. Simultaneously, it suggests that a product being established in a burgeoning market will necessitate continual investment for producing goods/services and expanding capacity, which would invariably be a significant cash consumer.

Advantages of Using the BCG Matrix

Utilizing the BCG Matrix offers numerous benefits, such as the following:

• Its concept is straightforward and comprehensible, making it easily accessible to different levels of management.
• This tool facilitates effective evaluation of existing opportunities and strategy formulation to maximize their potential.
• It guides companies in determining the optimal allocation of cash resources, aiming to enhance future growth and profitability.
• The matrix presents a structured framework for resource distribution across various products while providing a snapshot comparison of the product portfolio, enabling quick and easy assessments.
• The BCG Matrix also promotes strategic thinking by pushing companies to assess their products in the broader market context, encouraging a proactive approach to product management and future planning.

Limitations of the BCG Matrix

While the BCG Matrix is a beneficial tool, it has certain limitations that you need to consider. That way, you can thoroughly assess if it’s your right strategy. These limitations include the following:

• The model primarily uses two dimensions: relative market share and market growth rate. These factors don’t necessarily guarantee profitability, attractiveness, or success.
• It overlooks the potential synergy between different brands or product lines.
• The model assumes that businesses with lower market shares are less profitable, which is not always the case.
• Achieving a high market share can be costly and doesn’t necessarily translate into increased profits.
• ‘Dogs,’ or low market share products, can sometimes offer unique competitive advantages for businesses.
• The matrix doesn’t account for emerging competitors with swiftly growing market shares, potentially skewing strategic decisions.

Comparing BCG Matrix with the Ansoff Growth Matrix

The BCG Matrix and the Ansoff Growth Matrix are widely used strategic planning instruments businesses employ to examine their product portfolio and pinpoint growth prospects. However, they vary in their methodologies and focal points.

The BCG Matrix assesses the current product portfolio of a company by considering two key factors: the rate of market growth and the market share. The products are categorized into four groups: Stars, Cash Cows, Question Marks, and Dogs. This matrix aids businesses in making decisions regarding resource allocation and investment, focusing on growth potential and profitability.

Conversely, the Ansoff Growth Matrix scrutinizes a company’s growth opportunities by considering products and markets. The matrix organizes growth strategies into four quadrants: Market Penetration, Market Development, Product Development, and Diversification.

The Ansoff Growth Matrix equips businesses to identify potential growth avenues and make strategic decisions about product innovation and market expansion.

The Four Quadrants of The BCG Matrix

The Boston Consulting Group (BCG) Matrix is a strategic management tool that classifies a firm’s products or services into four categories, each represented by a quadrant. These quadrants are defined by market growth rate and relative market share.

Products in the Stars quadrant have a high market share in high-growth markets. They are the leaders in the business and often need continued investment to sustain their growth. If successful, Stars can eventually become Cash Cows as the market’s growth rate declines.

These products have a high market share in a low-growth industry or market. They generate more cash than what is necessary to maintain their market share. Because of their strong position and low growth needs, they are often seen as the company’s foundation and are desirable for generating strong cash flows and profits.

Question Marks

Also known as “problem children,” these products have a low market share in high-growth markets. They require significant resources to increase their market share. If this cannot be accomplished, they should be sold off. Deciding whether to invest in or divest from these products can be challenging for management.

Dogs are products with a low market share in low-growth markets. They neither generate substantial cash nor require massive amounts of cash. Often, these products are cash traps because of the money tied up in them, and companies usually opt to divest these products or businesses.

Each quadrant has different strategic implications and requires different resource allocations and management strategies.

BCG Positions Through Product Life Cycle

The BCG Matrix can be effectively utilized to analyze the lifecycle of each Product in your portfolio. The life cycle of a product comprises four stages: introduction, growth, maturity, and decline. By pinpointing where each Product resides in its lifecycle, you can ascertain its relevant position on the BCG Matrix.

During growth, products are generally classified as “Question Marks” in the BCG matrix. These products, having a low market share in a high-growth market, necessitate substantial investment for growth and market share capture, but they hold the potential to evolve into “Stars.”

As products mature and amass market share, they transition into the “Star” category of the BCG matrix. Boasting a high market share in a high-growth market, these products contribute significantly to the business’s revenue and profit.

With time, “Stars” may morph into “Cash Cows.” Products in this position have a high market share in a slow-growth market. They generate substantial cash flow for the business but require less investment compared to “Question Marks” or “Stars.”

Eventually, products may end their lifecycle and shift into the “Dog” quadrant of the BCG Matrix. These products, with a low market share in a low-growth market, may yield limited revenue and profits and often require significant investments to maintain or enhance their market position.

How To Make A BCG Matrix?

Creating and utilizing a BCG matrix is relatively simple. You must gather information about each product or service in your portfolio: relative market share and growth rate. Plot each Product on the matrix according to its market share and growth rate; the higher the market share, the further right it should be placed, while faster-growing markets should be placed higher up. With that said, follow the steps outlined below to create a compelling and successful BCG Matrix:

Step 1: Determine the Strategic Business Unit (Product-Market Fit)

The first step in creating a BCG matrix is to identify the specific business unit, Product, or brand you want to analyze. This selection is critical as it sets the foundation for the entire analysis process.

Step 2: Define the Market

Defining the market accurately is crucial to understand your portfolio’s positioning correctly. An incorrect market definition could lead to misclassification of products. For instance, Mercedes-Benz would be a ‘Dog’ in the overall passenger vehicle market due to its less than 20% market share, but it becomes a ‘Cash Cow’ in the luxury car segment.

Step 3: Calculate the Relative Market Share

Market share, measured by revenue or unit volume, reflects how much of the total market a company serves. The BCG matrix uses relative market share, comparing a product’s sales to its leading competitor’s. You can compute it as follows:

Relative Market Share = Your Product’s sales this year / Leading competitor’s sales this year

For instance, if your competitor has a market share of 25% and you have a 10% market share, your relative market share would be 0.4.

Step 4: Determine the Market Growth Rate

Using online resources or analyzing leading companies’ average revenue growth can help gauge an industry’s growth rate, commonly expressed as a percentage. Here’s the calculation:

Market Growth Rate = (Product’s sales this year – Product’s sales last year) / Product’s sales last year.

High-growth markets offer a larger pool of potential customers, providing ample opportunities for companies to generate revenue.

Step 5: Plot and Position the Circles on the Matrix

Once you’ve determined the market share and growth rate for each Product or business unit, plot these as circles on a two-by-two grid of the BCG matrix, with market share on the x-axis and growth rate on the y-axis. The size of each circle should correspond to the product or business unit’s market share: a larger market share means a larger circle. It is possible to draw this visualization using software tools or draw manually.

Sample BCG Matrix

Understanding how the BCG Matrix works requires looking at an example. That’s why we will take the example of Apple Inc., a well-known technology company with a diverse product portfolio. Here’s how some of their products might be categorized in the BCG Matrix:

• Stars: The iPhone could be considered a Star. It dominates a rapidly growing market with a large market share. Despite the competitive smartphone industry, the iPhone continues to be a leader due to its innovative features and strong brand loyalty.
• Cash Cows: The MacBook is a Cash Cow. It has a high market share in a relatively low-growth market. MacBooks are popular and generate substantial revenue, but the overall laptop market isn’t growing as fast as the smartphone market.
• Question Marks: Apple Watch might be considered a Question Mark. It has a lower market share in a high-growth market. Wearable tech is rapidly growing, but Apple Watch faces stiff competition from other tech giants.
• Dogs: The iPod is a Dog. It holds a small portion of the market in a market with minimal growth.. With the advent of smartphones that can store and play music, the demand for standalone music players like iPods has significantly declined.

Remember, the BCG Matrix is a simplified representation and may not fully capture the complexities of the market or business strategy. Also, the classification of products into different categories can change over time with changes in market dynamics.

Create and Utilize the BCG Matrix Using a Low-code Platform

As businesses grow and evolve, so does their product portfolio. Manual analysis of a business’s product portfolio is tedious and time-consuming. A low-code platform like DATAMYTE can help automate this process with its drag-and-drop interface to quickly create applications that can analyze your product portfolio in real-time using the BCG matrix. With DATAMYTE, you have all the tools you need to quickly create a BCG Matrix application and understand the positioning of your products in the market.

DATAMYTE is a quality management platform with low-code capabilities. The DataMyte Digital Clipboard , in particular, is a low-code workflow automation software that features a checklist and smart form builder. This tool lets you create a comprehensive BCG matrix checklist for your product portfolio, providing an automated way to measure and analyze market share and growth rate.

To create a checklist or form template using DATAMYTE, follow these steps:

• Log in to the DATAMYTE software and navigate to the ‘Checklist’ module.
• Click “Create Checklist.”
• Add a title to your checklist; select the category where it belongs.
• Start adding items to the checklist by clicking “Add Item.” 
• Define the description of each item, what type of answer it requires, and other relevant specifications (e.g., reference documents, acceptance criteria, limits).
• Assign a team member responsible for conducting the inspection using the checklist.
• Add signature fields for approvals (e.g., supervisors, quality assurance personnel).
• Save the checklist—you can now access it anywhere, and it will be available for use on any device.

DATAMYTE also lets you conduct layered process audits, a high-frequency evaluation of critical process steps, focusing on areas with the highest failure risk or non-compliance. Conducting LPA with DATAMYTE lets you effectively identify and correct potential defects before they become major quality issues.

With DATAMYTE, you have an all-in-one solution for creating and implementing the BCG Matrix. It provides an insightful way to evaluate product portfolios and develop strategies for growth. Book a demo to learn how DATAMYTE can help you optimize your product portfolio with the BCG Matrix.

The BCG Matrix is a powerful tool businesses use to evaluate their product portfolios and identify areas for potential growth. It provides an insightful way to assess the relative market position of each Product and develop strategies for success. With the help of a low-code platform like DATAMYTE, businesses have all the tools they need to create and implement the BCG Matrix quickly. Start today!

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What Is a BCG Matrix?

Table of Contents

Business models are based on providing products or services that are profitable now, but a good business strategy also asks, “What about the future?” Created by the Boston Consulting Group, the BCG matrix – also known as the Boston matrix or growth-share matrix – provides a strategy for analyzing products according to growth and relative market share. The BCG model has been used since 1968 to help companies gain insights on what products best help them capitalize on market share growth opportunities and give them a competitive advantage. 

More than 50 years after its inception, the BCG matrix model remains a valuable tool for helping companies understand their potential.

What is a BCG matrix?

A BCG matrix is a model used to analyze a business’s products to aid with long-term strategic planning. The matrix helps companies identify new growth opportunities and decide how they should invest for the future. 

Most companies offer a wide variety of products, but some deliver greater returns than others. The BCG matrix gives the business a framework for evaluating the success of each product to help the company determine which ones they should invest more money into and which they should eliminate altogether. It can also help companies identify a new product to introduce to the market. 

The matrix is divided into four quadrants based on market growth and relative market share. Each of these quadrants is discussed in more depth later in this article.

Anytime you’re considering making a pivot in your business, it’s helpful to also perform a SWOT analysis . This can help you understand the potential consequences of a major business decision.

What are the benefits of a BCG matrix?

The BCG matrix is a simple framework that all companies can use to evaluate their products. Anyone can look at the matrix and grasp which of the business’s products are performing the best. In addition to giving a bird’s-eye view of how products are performing, the matrix helps identify what factors make each product successful or unsuccessful. It also lets you see how your products stack up against one another. 

The BCG matrix is also a useful tool for uncovering new opportunities in your market and eliminating poorly performing products, which can save your company a lot of money in the long run. 

What are the limitations of a BCG matrix?

One limitation of using the BCG matrix is it doesn’t account for any factors beyond market share and growth. This means it won’t give you the complete picture as to why your products are succeeding or failing. While the BCG matrix is a great starting point, it’s not enough on its own to guide the future of a company. In many cases, it won’t provide enough information for handling complex business problems.

The BCG matrix isn’t a predictive analytics tool and won’t help you account for new products that could disrupt the market in the future.

How do you create a BCG matrix?

Now that you understand what a BCG matrix is and some of its pros and cons, let’s look at how you can set up your own matrix. To analyze your company, you’ll need data on your products or services’ relative market share and growth rate. 

When examining market growth, you need to objectively analyze your competition and think in terms of growth over the next three years. ( Porter’s Five Forces is one useful framework for this type of analysis.) If your market is extremely fragmented, however, you can use absolute market share instead. Next, you can either draw a BCG matrix or find a BCG matrix template program online. Several are free, while others are available for subscription or offered as part of another charting program.

Credit: DeiMosz/Shutterstock

In this four-quadrant BCG matrix template, market share is shown on the horizontal line (low left, high right) and growth rate is found along the vertical line (low bottom, high top). The four quadrants are designated Stars (upper left), Question Marks (upper right), Cash Cows (lower left) and Dogs (lower right).

Place each of your products in the appropriate box based on where they rank in market share and growth. Where you set the dividing line between each quadrant depends in part on how your company compares to the competition. Here is a breakdown of each BCG matrix quadrant.

Stars quadrant

The business units or products with the best market share and generating the most cash are considered Stars. Monopolies and first-to-market products are frequently termed Stars too. However, because of their high growth rate, Stars consume large amounts of cash. This generally results in the same amount of money coming in that is going out. Stars can eventually become Cash Cows if they sustain their success until a time when a high-growth market slows down. A key tenet of a BCG strategy for growth is to invest in Stars.

Cash Cows quadrant

A Cash Cow is a market leader that generates more cash than it consumes. Cash Cows are business units or products with a high market share but low growth prospects. Cash Cows provide the cash required to turn a Question Mark into a market leader, cover the administrative costs of the company, fund research and development, service the corporate debt, and pay dividends to shareholders. Companies are advised to invest in cash cows to maintain the current level of productivity or to “milk” the gains passively.

Dogs quadrant

Dogs, sometimes also referred to as Pets, are units or products with a low market share and low growth rates. They frequently break even, neither earning nor consuming much cash. Dogs are generally considered cash traps because businesses have money tied up in them, even though they bring back almost nothing in return. These business units are prime candidates for divestiture.

Question Marks quadrant

These parts of a business have high growth prospects but a low market share. They consume a lot of cash but bring little in return. Question Marks lose a company money. However, since these business units are growing rapidly, they have the potential to turn into Stars in a high-growth market. Companies are advised to invest in Question Marks if the products have potential for growth, or to sell if they do not. 

How do you use the BCG matrix to strategize?

Once you know where each product stands, you can evaluate them objectively and strategize the future of your business. The BCG matrix helps you identify which products you should prioritize and which need to be cut altogether. 

Here are four ways to use the BCG matrix to strategize for your business:

• If your goal is to focus on innovation, increase your investment in Stars and Question Marks. For example, you may be able to push a Question Mark into a Star and, later, a Cash Cow, by investing more in it.
• If you can’t invest more into a product, keep it in the same quadrant and leave it alone. One of the advantages of a Cash Cow is that it’s a well-established product that takes less effort to maintain.
• Reduce your investment and take out the maximum cash flow from a product, which increases its overall profitability. This strategy is best used for Cash Cows.
• Divest the amount of money invested in a product and apply it elsewhere. This strategy is best for Dogs.

Since consumer preferences are constantly changing, it’s impossible to predict the long-term growth of any product. That’s why you should regularly revise and update your BCG matrix as market conditions change. For instance, a product that was a Question Mark could quickly turn into a Dog, so you should be ready to walk away if the stakes get too high. 

At the end of the day, the goal isn’t to succeed in any one area – it’s to create a diversified portfolio. You need products in every quadrant of your BCG matrix to keep a healthy cash flow and offer products that can secure your company’s future.

What is the role of cash flow in the BCG matrix?

Understanding cash flow is key to making the most of the BCG matrix. In 1968, BCG founder Bruce Henderson noted that four rules should guide your approach to product cash flow strategies :

• Margins and cash generated are a function of market share. High margins and high market share go together.
• To grow, you need to invest in your assets. The added cash required to hold shares is a function of growth rates.
• High market share must be earned or bought . Buying market share requires an additional increment or investment.
• No product market can grow indefinitely. You need to get your payoff from growth when the growth slows – you lose your opportunity if you hesitate. The payoff is cash that cannot be reinvested in that product.

That last point is more important now than ever. The market moves more quickly now than it did 50 years ago, and BCG has since published recommended revisions on how to analyze and act on the matrix information. Maintaining a healthy supply of Question Marks readies you to act on the next trend. Cash Cows, conversely, need to be milked efficiently because they may fall out of favor – and profitability – more quickly. [Learn why profit margins are important for your business.]

What is a real-life BCG matrix example?

To ensure you understand a BCG analysis, it can be worthwhile to look at a real-life BCG matrix example. A famous BCG matrix example is that of The Coca-Cola Company, which owns many more drink lines than just its titular brand.

In the Coca-Cola BCG matrix example, Diet Coke and Minute Maid are Question Marks, as these products attract a modest audience, but still have room to grow. Its bottled water brands Kinley and Dasani are Stars since they dominate the market in, respectively, Europe and the U.S., and show no signs of slowing growth. Its titular drink is a Cash Cow since it experiences low growth and a high market share. However, Coca-Cola is also a Dog because legislation against soft drinks – not to mention public sentiment turning against them – has decreased soda sales. 

The Coca-Cola company’s real-life BCG matrix example provides an important takeaway: Sometimes a product can fall into more than one quadrant. 

One of the best ways to improve your sales is through sentiment analysis . Sentiment analysis can help you determine how consumers feel about your brand and products. You can also do a PEST analysis to consider political, economic, social and technological factors.

What are alternative matrix models?

While a great tool, the BCG matrix isn’t for every business. Some companies find they don’t have products in each quadrant, nor do they have a steady movement of products among the quadrants as their product life cycle progresses.

Some consultants advocate using the GE/McKinsey matrix instead, which measures products according to business unit strength and industry attractiveness rather than market share, the complexity of which may be outside an individual company’s control. Comparing the two models can reveal hidden insights that fuel increased growth for your company.

Jamie Johnson, Max Freedman and Katherine Arline contributed to the writing and reporting in this article. 

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BCG Matrix of Nestle [Detailed] Nestlé is a common house-hold brand for us since years. Think fast and tell me what all Nestlé products you love! I bet NesCafe, Maggi or chocolates like Kit-Kat made it to your favourite list. Now, have you ever wondered, that do firms also treat its products differently? How do they decide which brands to keep? Where to add new products? When to produce more goods? If yes, then this article is definitely curated for you. Give it a read and see how firms solve these critical questions.

Nestle is one of the world’s leading FMCG company. Most likely, dream company for most of the B-school students too. It has its presence in about 187 countries. Think how many market-segments and strategies it would be catering to! In order to understand their strategies, we have to get to know how  BCG matrix of Nestle works.

To serve its immensely heterogenous customers, they maintain a broad brand portfolio, with numerous products under it. And, yet is successfully leading in most of the markets worldwide.

Boston Consulting group’s product portfolio matrix is designed to help with long term strategic planning, to help a business consider growth opportunities. This is done by reviewing its portfolio of products to decide where to invest, to discontinue or develop products.

So, let’s not wait anymore, and start digging!

What is BCG matrix?

BCG matrix isn’t a new phenomenon. And, in the changing digital landscape, we can slurp a lot of information from it. In fact, we can also apply it for developing better marketing strategies.  

We will begin with understanding what are the quadrants of this matrix, how to interpret it, and many more things!

So, the Matrix is divided into 4 quadrants based on an analysis of market growth and relative market share, as shown in the diagram below.

Source: superheuristics.com

This matrix is, put simply, a portfolio management framework that helps companies decide how to prioritize their different businesses. It is a table, split into four quadrants, each with its own unique symbol that represents a certain degree of profitability. Quadrants being- question marks, stars, pets (often represented by a dog), and cash cows.

Now, let’s understand these quadrants better.

Each of the four quadrants represents a specific combination of relative market share, and growth:

Low Growth, High Share: Firms should milk these “cash cows” for cash to reinvest.

High Growth, High Share: Firms must invest in these “stars” as they have high future potential.

High Growth, Low Share: Firms should invest in or discard these “question marks,” depending on their chances of becoming stars.

Low Share, Low Growth: Firms should liquidate, divest, or reposition these “pets.”

Okay, so imagine that you have your matrix. Is your problem solved? No more critical decisions? The answer is “no”. Your task as an MBA is to interpret what the BCG matrix of Nestle shows you.

For instance, “pets” might look like the least attractive product. Will you discard it? Or push it to become cash cow or star later?

Also Read:  The BCG Matrix – What is it and how to use it

Next, we should now start our analysis of BCG matrix of Nestle, India

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BCG Matrix of Nestle India

Here I am taking the case of Nestle, India specifically. Because, I aim at making it easily relatable for you. Now its time to check out the BCG Matrix of Nestlé and what products of the company fall under what Quadrant.

For Nestle, there are some products those have been undoubtedly the Cash Cows. They are- Nestle’s Maggi Noodles, NesCafe and its popular chocolates like KitKat, Munch.

With a market share of 80-85 %, Maggi Noodles holds a pseudo-monopoly in the market and have a high customer loyalty.

These products need very less investment. In fact, they are already available at every nook and cranny. And loved my most of us!

Stars 

In the case of Nestle, Nestle’s Mineral Water and Nestle’s Nescafe Coffee (like Nescafe Latte) fall in the Star quadrant of the BCG Matrix of Nestle.

With the growing number of health-conscious customers, these products have the potential to produce greater ROI later. Even though, it might take heavy investment to make Nestle-brand visible in that market, they may turn to cash-cows pretty soon!

Source: nestlepurelife.com

Question Mark

Now this is an interesting bunch of products!

Nestle Everyday, Nestlé slim and Nestlé Milk maid are some of the milk and milk-based products from the house of Nestlé. And they come under Question Mark category.

This domain needs a higher investment, because its in the phase of development. And it is a high-risk decision to invest in them too. Like for example, “É by Nescafé” ! Nestle aims to revolutionize coffee-making with this new smart coffee maker.

Source: enescafe.in

Products under this category are not expected to bring in any significant capital. So future investment is seen as a wastage by firms, it could be invested in a Question mark or Star category instead.

I believe Nestle Milo and Koko Crunch can be put in this category. They did not have any significant grasp in the market.

Source: Nestle.com

Its time to dig deeper. Let’s see how Nestle “milked” their Cash-Cow Maggi!!

Maggi- Milking the Cash cow!

Source: nestle.in

Do you know how has Nestle uses this as an opportunity?

Let me tell you some sad facts first. Nielsen points out that 85% of all consumer packaged goods (CPG) product launches flop.

Yet, Nestle never steps back from launching new products. And what’s a better way to do that than launching under the safety-net of “Maggi” brand?

Firstly, new variants of existing product lines have more chances of surviving out. Secondly, if gaining popularity then same distribution channels can be used, without extra efforts. And thirdly, analysts have noticed that Nestle doesn’t even feel the need to advertise them.

And lastly, as consumer already love Maggi’s brand, they hardly spend time for purchase decisions.

Now, the next segment is to know what strategy to follow, based on the growth-share matrix??

What Next to do with the Growth-Share Matrix?

We can use this matrix to decide on multiple fronts. Starting from resource allocation to utilization of marketing channels or platforms.

It can help grow a company’s expected ROI per channel. Now, it may vary for different B2B and B2C businesses and even across industry sectors.

For instance, high growth and high returns, investing in organic search (SEO) may be a good choice. At the other end of the scale, we have not witnessed companies growing exponentially and achieving high ROI as a result of Twitter alone.

Source: yewbiz.com

You can apply different strategy according to the quadrant you are in. The above image summaries a generic trend followed in the industry.

For understanding how the resource allocation is decided by firms do read our article on BCG matrix of ITC .

It tells you about how the matrix can help you to understand which resource allocation-strategy to use for which category. The strategies that are used by marketers are- Build, Hold, Harvest and Divest.

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We learnt why companies need a BCG matrix and what it is. Why it's such an essential tool for marketers.

We created The BCG Matrix of Nestle, keeping its broad product portfolio in mind. We identified the Matrix's various components, namely- Star, Cash Cow, Question Mark and Dog.

Next, we analysed how Nestle “milked” a cash cow- Maggi. Since Maggi is a well-know brand, hopefully this article provided a lucid clarity on how Nestle benefits from it.

And then we can see how can the matrix be used in order to decide where to invest and what platform to use, according to the quadrant.

Hope this article helped you!

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• How to Apply BCG Matrix as a Powerful Strategic Planning Tool?

The contemporary corporate world as we see is getting enormously competitive with each passing day. Besides, businesses are trying their best to compensate for the losses incurred by the unfortunate COVID-19 crisis that has gripped the world for more than two years now. Having said that, businesses are revamping their strategies and approaches to edge past their competitors.

This is where strategic planning and strategic management come into the picture. Each business has its unique vision and mission statements that it pursues in an uncompromising manner. Further, the vision and mission of a company inspire strategic long-term goals that are planned, executed, and measured with great efficiency. Needless to say, it takes a lot of research, analysis, and brainstorming to craft strategic plans that can add value to an organization.

Table of Contents

• Introduction

BCG Matrix Definition

• Application of BCG Matrix
• McDonald’s BCG Matrix
• Toyota BCG Matrix
• Reckitt and Benckiser BCG Matrix

For that, business leaders use effective strategic planning tools and models like PESTLE Analysis, SWOT Analysis, VRIO Analysis, and other models subject to the purpose of strategic analysis. Furthermore, organizations rely on an effective change management process to optimize their strategic plans by bringing positive changes.

If we look at it from the perspective of assessing the competitive positioning of a company’s products and services, the BCG Growth Matrix is an excellent analysis model applied by businesses to gauge the success of their product lines.

In this thoughtful article, we delve deep into the various layers of the BCG Growth Matrix to understand the importance of the model and also effective application of it. The subsequent sections present an elaborative description of all aspects linked to the BCG Matrix.

The BCG growth share matrix was proposed by the Boston Consulting Group in 1970 as a strategic planning model to visualize the success of a company’s products or services. To elaborate, the matrix uses graphical representations of products and services to help the top management identify which products perform the best and the ones that are underperforming. Consequently, the company can undertake effective planning in terms of backing products with greater investments, discontinuing the loss-making products, or altering the product portfolio. The BCG Matrix template is illustrated below.

To elucidate, the graphical representation of products and services in the BCG Matrix plots market share on the horizontal axis and the rate of growth on the vertical axis respectively. The matrix classifies products and services into the following four classifications also known as the 4 squares in the BCG Matrix Template.

• Question Marks

Given below is an elucidation of each of these classes of products or services.

“Stars” Category

The products in the “Stars” category are the best performing products in terms of revenue generation, profitability, market share, and market growth. These products offer very high returns on investment and create great opportunities to explore new markets and scale in emerging economies. These can also be seen as the best-performing assets of a business.

Market Share: High

Market Growth Rate: High

Significance in strategic planning: With respect to strategic planning aligned with a company’s vision, the star products are of great significance. In fact, they closely follow the 80-20 Rule as more than 80 percent of revenue generation comes from these 20 percent products in the entire product line of a business. Having said that, companies should plan to add value to these products, invest more funds in these products and promote them with the most effective marketing strategies. With these products, companies can penetrate new markets in a worthwhile manner and offer higher profitability.

“Question Marks” Category

The next category includes products or services that have the potential to attain an impressive market share but in the current scenario, the market for these products has considerable uncertainties. To explain, there is a lack of certainty creating doubts about whether the market will decline in the future or scale. Besides, these products also utilize a large amount of a company’s cash as the market share is low and market growth is high. It may also be the case that these products might be using the largest share of the company’s resources and expertise.

Market Share: Low

Significance in strategic planning: From the viewpoint of strategic planning, the performance of products in this quadrant needs to be tracked in a continuous manner with well-defined key performance indicators. The company should evaluate the products closely to decide if the products needed to be continued. Besides, the company needs to plan effective strategies to reduce costs going into these products and to transform them into products offering unique propositions.

“Cash Cows” Category

The third category in the BCG Matrix includes “Cash Cows” which are basically the products that generate consistent cash flow for a business. To elaborate, these are the products that have a large market share and are well-established in consumer perception. With these products, companies can sustain their cash flows and evaluate growth in a convenient way as their growth patterns are highly predictable.

Market Growth Rate: Low

Significance in strategic planning: Business leaders and strategic analysts need to find ways in which they can take advantage of the presence of these products in mature markets and hence, convert them into star products.

“Dogs” Category

Products in this category have low penetration in the market and the market growth is low as well. To elaborate, these products can lead to cash traps for companies as they draw high investments but have little to no growth adding to potential losses.

Significance in strategic planning: In terms of strategic planning, identifying products in the “dogs” category will help companies to decide on discontinuation of products and disinvestment to get out of the cash traps.

Going further, let us now comprehend how the BCG Growth Matrix can be applied in a stepwise manner. The ensuing section provides details of an effective application of the model.

Stepwise Application of BCG Growth Matrix

Organizational leaders and analysts can apply the BCG Matrix by following the steps cited below for optimized strategic planning and execution.

Defining the market

The first and foremost step while applying the BCG Matrix is to clearly define the market in which the products or services are being analyzed. Defining the market clearly will further establish the context of the analysis. Here, it is imperative to note that defining the market incorrectly will have drastic consequences in terms of the classification of products as per the above-mentioned criteria. To explain, the implications will be largely different when Apple iPhones are evaluated in the premium smartphone market and when the same is assessed in the budget-friendly smartphone market. This example clearly illustrates that defining the market in a wrongful manner can lead to misleading results.

Evaluate market share

As mentioned above, the graphical representation illustrated in the BCG Matrix plots relative market share on the horizontal axis. Hence, the next step in applying the BCG Matrix is to evaluate the relative market share.

To find relative market shares for plotting the BCG Matrix, you can apply the following formula.

Relative Market Share: Brand’s market share/ Market share of the largest competitor in the industry

Evaluate market growth rate

The next step is to evaluate market growth as the vertical axis of the BCG matrix plots market growth. For finding the projections and current positions in terms of market growth, various factual reports are available on the internet that can be used to scan relevant data. What is highly important is to rely on credible sources of data and information.

Having evaluated the relative market share and the market growth rate, the next step is to plot units on the BCG Matrix with a market share on the vertical axis and market growth on the horizontal axis.

As you can see, it is quite simple to use the BCG Matrix for effective strategic planning with respect to an organization’s goals and SMART Objectives. Next, to get further clarity on the application of the matrix, let us apply this model to some real organizations to evaluate BCG Matrix examples.

BCG Matrix Examples With Application To Real Companies

Bcg growth matrix of mcdonald’s.

McDonald’s as we know is one of the leading quick-service restaurant brands with a massive global presence. The BCG Matrix of McDonald’s (in the Australian Market) will assess the product offerings of the company as per market share and market growth. The segmentation of McDonald’s products into the four quadrants of the BCG Matrix is illustrated below.

Defined Market: Australia

McDonald’s Star Products

The star products are those that have a large market share amid incremental market growth. For McDonald’s Australia, its star products as per Dailymail include Cheeseburgers, Golden Hash Brownies, Big Mac Beef Burger, McNuggets, and McCafe Cappuccino.

McDonald’s Question Mark Products

These are the products that have a low market share. For McDonald’s Australia, the category of “question market products” includes onion rings, green salads, McFlurry, desserts, and teas.

McDonald’s Cash Cows

These are the products with relatively lesser market share in comparison to star products but these products generate regular cash flow. For McDonald’s Australia, the cash cows include french fries, beef burgers, happy meals, and wraps.

McDonald’s Dogs

Apple pie, apple slices, frozen cold drinks, and cookies fall in the Dogs category for McDonald’s Australia. McDonald’s should look to discontinue these products as the market growth is very low and the market share is also next to negligible.

An illustration of McDonald’s Australia BCG Matrix is presented below

BCG Growth Matrix of Toyota

Toyota is a globally successful Japanese automotive manufacturer that has a dominant presence in different parts of the world. In fact, with a brand value worth $ 59.5 billion, Toyota tops the list of the world’s most valuable automotive brands . Given below are the BCG matrix quadrant divisions of Toyota with respect to the Indian Market.

Defined Market: India

Toyota’s Star Products

With respect to the Indian market, Toyota’s star products that have a high market share include Innova Crysta, Glanza, and Fortuner primarily as per Statista. These products are offering a high ROI to the company in the Indian market and helping the brand gain competitive advantages.

Toyota’s Question Mark Products

In this category, for Toyota, the cars with an uncertain future for their segments include Yaris, Corolla, and Land Cruiser. Potentially, these are great cars with luxury features but there are large uncertainties that prevail.

Toyota’s Cash Cows

Toyota Etios and Urban Cruiser are the cash cows for Toyota in the Indian market and if these cars are optimized in terms of features, safety, and other specifications, they do have the potential to emerge as cash cows in the middle-income segment that forms the largest section of car consumers in India.

Toyota’s Dogs

With respect to the Indian automotive market, Toyota Prius, Toyota Prado, and Toyota Vellfire are the cars that Toyota should look to discontinue in India.

An illustration of Toyota’s BCG Matrix with respect to the Indian market is presented below

BCG Growth Matrix of Reckitt Benckiser’s Brands

Reckitt and Benckiser is a British consumer goods company with its operations spread all across the globe. Further, Reckitt and Benckiser Group has various brands under its conglomerate. The BCG matrix illustrated below sheds light on the classification of the group’s brands in the European market.

Defined Market: European Market

Reckitt and Benckiser’s Star Brands

These are the brands that offer the highest returns to the company in terms of cash flow and market penetration. For the company, its star brands include Finish, Airwick, Dettol, Veet, and Harpic. As per insights from Reuters , Finish, Veet, Airwick and Harpic generate around 70 percent sales for the company.

Reckitt and Benckiser’s Question Mark Brands

For Reckitt and Benckiser, the brands that have a rather uncertain future include Airborne, Nurofen, Calgon, and Nutramigen.

Reckitt and Benckiser’s Cash Cows

Brands inclusive of Vanish, Durex, Strepsils, Clearasil, Lysol, Gaviscon, and are the cash cows for Reckitt and Benckiser. These products have fixed cash flow patterns and generate regular revenue for the brand being essential products.

Reckitt and Benckiser’s Dogs

The brands that the company should possibly look to discontinue include Enfa and Cillit Bang.

An Illustration of Reckitt and Benckiser’s Brands BCG Matrix Is Given Below

To conclude, the BCG Growth matrix is a highly influential strategic planning tool that helps companies understand which products in the product line are aligned with the strategic vision of the company. Having said that, companies can plan to boost investments in the outperforming products, improve the performance of products with considerable market share and disinvest in products of brands that are liabilities for the company.

What are the limitations of the BCG Matrix?

The BCG Matrix has some limitations, such as oversimplifying the complexities of real business scenarios, focusing only on two factors (market growth rate and market share), and not considering other critical factors like competitive dynamics and industry trends.

Can the BCG Matrix be used for diverse industries and sectors?

While the BCG Matrix was initially designed for use in the context of diversified businesses with multiple products or business units, it can also be adapted and applied to specific industries and sectors to gain insights into their strategic planning and resource allocation. However, modifications may be necessary to suit the unique characteristics of each industry.

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By Oliver Sealey |

 Reviewed By Rebecca Baldridge |

May 17, 2022

What is the BCG Matrix?

The Boston Consulting Group (BCG) designed its four-celled matrix, the BCG Matrix, to aid in long-term strategic planning. The matrix is used to assess the growth opportunities of different products/brands that an organization has in its portfolio based on relative market share and market growth rates across industries/sectors.

The matrix makes it possible to examine the business potential and market environment of different products and brands, which enables the company to decide where to invest, divest, or develop new products.

For credit analysts, the matrix can be a helpful framework for analyzing business risk, an essential part of deciding the credit-worthiness of a company.

In this article we’ll examine how the matrix categorizes products, giving examples. We’ll then see what actions companies can take having decided on the categories. Finally we’ll look at some of the limitations of the matrix.

Key Learning Points

• The BCG matrix is divided into four quadrants and is based on two parameters, relative market share and market growth rate
• The BCG Matrix includes four categories: stars, cash cows, question marks, and dogs
• To calculate the relative market share of a product, divide its market share by the market share of the product’s largest competitor
• This matrix can help businesses make good choices around their portfolio. For example, it can help companies decide which products should be their focus and which should be discontinued
• Care should be exercised around the use of the matrix. It can over-simplify concepts due to its two axis nature
• “High” and “low” market share and market growth determine which category a product ends up in, but deciding what “high” is can be difficult
• Defining the market can also be difficult. Deciding define the market broadly or more narrowly will make a big difference to the matrix and the categories it suggests for a company’s products.

BCG Matrix – Key Terminologies

The BCG matrix is divided into four quadrants and is based on two parameters – relative market share and the market growth rate. The horizontal axis of this matrix represents relative market share, while the vertical axis represents the market growth rate. The four cells of this matrix are designated stars, cash cows, question marks, and dogs. There are general actions associated with the 4 different types, but in the real world companies may of course decide to do something completely different if it suits their plans!

“High” and “Low”

The axes are categorized by “high” and “low”, which means there may be some difficult choices. When analyzing market growth, 10% is often used to decide a market is “high” growth. This can seem arbitrary. Imagine two markets, one with 10.1% growth, and another with 9.9% growth. Some judgement may be needed to decide what “high” and “low” mean in BCG market growth.

Market share is somewhat easier to analyze. The market share of all players in the market are compared. If the market share of the company being analyzed is greater than its next biggest rival, it’s deemed “high” (we’ll look at how that works in more detail later in this article).

Four Quadrants of the BCG Matrix

The four quadrants of the BCG Matrix are:

Exhibit high growth and command a high market share. A company should invest more in stars, as they are well-established products or brands in high-growth markets. Stars are leading brands in exciting markets. The Apple Watch in 2022 is a star. It’s selling around a third of smartwatches worldwide and has more than three times the market share of its nearest rival, Huawei. The market is predicted to grow by around 28% every year at this point, making it a very high-growth market. Despite being the market leader Apple will have to hold its position. This means it will have to spend a great deal on marketing, and making sure its product stays competitive. Because of this, as of 2022 the Apple watch probably isn’t the most cash-positive product in Apple’s portfolio. If Apple keep spending and making good choices, the watch market may mature and the Apple watch may become a cash cow. This would be the best outcome according to the BCG matrix.

Exhibit low market growth but command high market share. These are the ideal products to have, according to the BCG matrix. They are leading brands, in slower markets. It may seem counterintuitive that slower market growth would be seen as positive, but cash cows require little investment. The brand is dominant, and the fewer new buyers to the market will naturally gravitate to the brand. The market is less frenetic than before, and the company doesn’t have to spend as much cash winning the hearts and minds of all that growth!

The cash these products generate can be invested elsewhere. This is an important part of BCG, not immediately obvious from the diagram. The portfolio of a company should be a pipeline, with cash-positive products (primarily the cash cow) paying for the development of question marks and stars.

Coca-Cola has been a cash cow product for the Coca-Cola company for a long time. As of 2023, it holds around 46% of the soft drink market sales, far beyond its nearest rival. The market growth is modest, around 3.2% per year at this point. Coca-Cola has created excellent positive cashflows for the company, which they can use for other ventures such as their less mature food business. The part of Coca-Cola that doesn’t fit as well is the marketing spend. You’re probably aware of Coca-Cola adverts. A better BCG fit would have Coca-Cola not feeling the need to spend so much on marketing. Again, the real world means not everything fits nicely into a matrix.

Question Marks

Show high growth but command low market share. Question marks require significant investment to maintain or increase market share, but are excellent prospects for the company.

Question marks are usually recently introduced products with sound commercial prospects. With sufficient investment, they have the potential to become stars. If neglected, they may become dogs. Wise companies will know if they can’t build a question mark into a star. They’ll divest despite the exciting market.

It’s easy to think of examples of successful question marks, just think of any star or cash cow and rewind some years. It’s more interesting to think of a failed question mark. You could argue that Google Glass was a question mark that went wrong. Their wearable smart glasses were introduced around 2013. At that point, their market share of wearable tech was small, as not many wearable glasses were being sold compared to e.g. watches (this does rely on us putting glasses in with the broader “wearables” market, highlighting one issue of BCG: defining the market). But, the market was growing. It was arguably a case of “too early”, which is fairly common in tech. Google found the technology wasn’t quite good enough, and presumably was having to spend colossal amounts of money behind the scenes to develop, market and distribute the glasses. They ended up halting the production of the glasses in 2015.

Have both low growth and low market share. The bad performance may be due to high costs, inferior quality, or a lack of effective marketing.

Unless there is some hope of gaining market share, a company is wise to dispose of these products if they are a drain on cash. Dogs are often, but don’t have to be, cash negative.

Imagine you are the undisputed market leader in producing vinyl records in the 1990s. You probably have a great cash cow, but the years to come will reduce that to a dog. CDs and streaming will make your position obsolete and turn your product into a dog. It may be tempting to divest all dogs, but they may still be cash-generative. Vinyl now commands a premium price, so although they represent a slim minority of music sales it is still probably worth being in the market.

BCG Matrix – Advantages and Lim itations

The BCG matrix is very useful for manufacturing companies since an understanding of a product’s market position is imperative to understanding its growth potential.  The BCG matrix can also be used to assess the market share of a product relative to competing products. The matrix offers a useful framework for allocating resources to particular products.

However, the matrix does have certain limitations. First, markets may be less clearly defined than the matrix suggests. Moreover, it doesn’t offer information about what the competition is doing.  Second,  the market growth rate and relative market share are not the only indicators of profitability. Third, this four-quadrant approach may be overly simplistic considering the dynamic nature of markets and industries/sectors. Finally, a high market share does not always result in strong profits given that high costs may also be involved in maintaining that market share.

BCG Matrix – How to use the BCG Matrix

Using five parameters – the definition of the market, relative market share, market growth rate, cash generation, and usage of cash – a company should allocate its products to the relevant quadrant. Based on this allocation, the company can determine which products to invest in and which to discontinue.

It might be noted that defining the market is the most important step. If a market is incorrectly defined, the product could be incorrectly classified. The relative market share is calculated by dividing the selected product’s market share (or revenue) by the market share or revenue of the largest competitor in the sector. Moreover, it’s also necessary to calculate the market growth rate. This can be estimated by assessing the average revenue growth of the leading companies within the product sector.

BCG Matrix – Advantages and Limitations

The BCG matrix is very useful for companies since an understanding of a product’s market position is useful for understanding its growth potential.  The BCG matrix can also be used to assess the market share of a product relative to competing products. The matrix offers a useful framework for allocating resources to particular products and building a healthy pipeline in a product portfolio.

However, the matrix does have certain limitations. First, markets may be less clearly defined than the matrix suggests. We’ve seen in the examples that you could narrowly define the vinyl market, or put it as part of the wider music market.

Market growth rate and relative market share are not the only indicators of profitability. We saw that vinyl still has good cashflows for some companies, and question marks may not always be the best to build if it is a pointless drain on company resources with no future.

Finally, we need to be mindful that categorizing by “high” and “low” may lead to some products that are very similar being given different categories. Our earlier example of a 9.9 and 10.1% market growth is relevant here. Some judgment and discussion would be needed to get the most out of the matrix in this case.

Calculating Relative Market Share

The relative market share is used to compare a company’s brand market share with the market share of its largest competitor in the industry.  When we calculate relative market share, the market leader’s market share is used as the benchmark.

Relative Market Share Formula:

Relative Market Share = % market share of the company’s product divided by the market share of the largest competing product.

Below we’ve calculated the hypothetical relative market shares of two products from one company using the market share of the largest competitor in that industry. If you’d like to practice this yourself, please see the download attached to this article. This attachment has more products to practice on beyond what’s in the graphic below.

Brand B appears to be dominant in its market, far beyond the share of its nearest rival, rival 1. It is a star or cash cow, depending on the market growth.

Brand A is lagging. It operates in a different market to brand B, and can’t compete on share with its rival 1. It will be a question mark or dog.

The BCG matrix can be a helpful tool for thinking about a company’s portfolio. It creates clear categories and can create great discussions about the balance of products, their cashflows, and their future. It can also suggest sensible actions to create that balance. However, it should be treated with care. It is arguably too simple, reducing the world to two axes. It’s also important to think carefully about what the market is before starting the analysis.

For credit analysts, BCG can create a clear set of categories and language when putting together presentations on a company’s business risk.

If you’re interested in learning more about the world of business, you may be interested in our Investment Banking course . This course gives you the same training as new hires in the top investment banks and covers a wide range of subjects.

Additional resources

Porters Five Forces

Credit Risk

Financial Modeling Course

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BCG Case Interview Guide: Criteria, Technique & Tips

Boston Consulting Group  (BCG) is among the top three largest and most prestigious management consulting firms ; candidates must pass through high-stress, yet exciting consulting interviews called “case interviews”.

In this article, I’ll walk you through the fundamentals, techniques, tips, and tricks you can use to break through the case interviews that BCG typically use.

BCG case interviews overview

Bcg recruitment process.

There are three main phases BCG recruitment timeline – resume, tests and interviews . The whole process can take 2-3 months , and if the candidate is accepted, the job usually starts 6-12 months after application. New offices with higher HR demands and staffing shortages can be less clear-cut, but generally faster.

The first two are already covered by other articles on our website: Consulting Resume Overview  and  BCG Potential Test . Once you’ve passed those challenges, the final test is the case interview , where all the fun is.

If you haven’t grasped the basics of case interviews, I advise you to go and read this Case Interview 101 crash course – a “guidebook” written for both beginners and experienced case interviewees. Link is on the right.

Now, let us continue with BCG candidate-led cases.

BCG interview process

The typical BCG candidate can expect 4-6 interviews during a span of 4-8 weeks . The first 2-3 interviews are likely done by Engagement Managers, while later interviews are reserved for the more senior Partners or Directors. BCG interviews usually consist of two parts: Fit interview (10 minutes) and Case interview (30-45 minutes).

What does BCG look for?

BCG looks for the three core skills and qualifications in potential employees: problem-solving skills, leadership ability and achieving mentality . Prior business background is not required, but it’s highly advised for case interviews. Technical/industry knowledge is required for certain career tracks – such as at support centers.

• Problem-solving skills: To be specific, it’s the analytical aspect of problem-solving. This is the core of consulting work – breaking down business problems to find root causes and deliver solutions.
• Leadership ability: A consultant doesn’t just sit around, alone, analyzing stuff. A consultant works with his team , connects to relevant experts, then uses that expertise to convince clients to follow his plans. The work involves a lot of people influencing, so leadership skills are absolutely crucial.
• Achieving mentality: You simply can’t get far without this mindset. Management consulting is notorious for tight deadlines and heavy workload; you must always go the extra mile if you’re to survive in this industry.
• Business background: Consulting firms don’t explicitly look for people with business backgrounds, but fundamental business knowledge is necessary to pass the recruitment process. If you come from a non-business background, you definitely need to brush up on this aspect; check out our video on Case Interview Starter Guide for Non-Business Candidates for more details on what to learn.
• Technical skills: If you’re applying for specialist roles you may be questioned on technical skills besides the usual case interviews . Precisely which skills are tested will differ according to the role and office, so check on their websites or contact the office for the details before going.

In BCG case interviews, each candidate must successfully display the following five attributes – among which the first three are crucial to consulting . In the Case Interview End-to-End Secrets Program , I’ll teach you how to demonstrate all of these attributes effectively, both in the case interview and the PEI.

BCG case interviews format

“case interview” – what does it mean.

A case interview is an interview with a business context In a case interview , you are given a business problem and asked to solve it – that problem, together with the whole surrounding business context, is called a case.

“The Pirate Company, based in the Caribbeans, offering assets removal services to ships in the area, is suffering from negative profits. They want you to look into the cause and solve it.”

In this case, the problem is decreasing profits. If you are the candidate, you’re supposed to find out what’s causing it, and most of the time, also how to fix it.

What are BCG case interviews like?

BCG case interviews are often candidate-led . At the most extreme of this format, the candidate “leads” the problem-solving process breaking down the problem through an “issue tree” and hypothesizing for the root causes . The interviewer assists the candidate by supplying data to test their hypotheses. There are two extremes in terms of the autonomy you’d have in a case interview. On one end of the spectrum, in a candidate-led case, you lead the problem-solving process. On the other end, in an interviewer-led case , the interviewer tells you what to do.

If the aforementioned Pirate case were interviewer-led, you’d answer a series of questions coming from the interviewer. 

This time, however, it’s a candidate-led case, so you’ll instead actively break down the big profit problem and look for the root cause.

Candidate-led cases focus on one big problem

In candidate-led cases, you solve the problem in its entirety, not through small questions as in interviewer-led cases.

As with all kinds of cases, a top-down approach is of prime importance. You are not supposed to yield solutions immediately, but to break the problem down into small parts and tackle each at a time. That’s how real consultants solve problems, not showing it in an interview will ruin your chances.

To solve The Pirate Company’s profit problem, you would first break the profits down into revenues and costs, then dive into each subdivision. This method ensures you cover all possible factors leading to the original problem, to deliver the most in-depth and comprehensive answer.

Candidate-led cases are more flexible

In candidate-led cases , you are free to analyze the problem as you see fit.

The interviewer usually has a “case universe” in mind – basically a fictional world formed by data on the supposed client and their problem. You’re allowed to freely explore this world.

Even if you venture out of the scenarios imagined by the interviewer through unexpected issue trees and solutions, he/she will most likely come up with new information on the fly to help you solve the case in your own way.

Suppose, in the Pirate case, the interviewer intended to have the costs divided into ship costs and crew costs; you, on the other hand, segment the costs into daily operations costs and battle costs, reasoning that battles don’t happen every day and their costs vary significantly.

If this was an interviewer-led case, the interviewer would likely direct you to ship and crew costs through pre-determined questions. In a candidate-led case, though, he’ll most likely play along and derive some data on operations and battle costs for you.

Candidate-led cases place less emphasis on being right

You are allowed a larger margin of error in candidate-led cases than in interviewer-led ones.

In candidate-led cases, you have to break down the problem all by yourself, with very little assistance from the interviewer. As such, you can be “forgiven” for larger errors than in interviewer-led cases, where you are effectively guided through that process.

Interested in learning about  the interviewer-led side of the spectrum? Wanting to know about the mechanisms of case interviews at McKinsey – the most prestigious management consulting firm? See this extensive guide on interviewer-led case interviews at McKinsey.

BCG case interview fundamentals

Candidate-led case interviews are much more similar to real consulting work than their interviewer-led cousins; as such, you need to approach these cases in the same way real consultants approach their projects – using the fundamental concepts of consulting problem-solving.

There are seven concepts : Problem, Root Cause, Issue Tree , MECE , Hypothesis , Data, and Solution.

Concept #1: Problem

Every case interview starts with one well-defined problem, which is accompanied by a specific objective. To illustrate the principles, I’ll be using a simple, daily-life problem:

There are cockroaches in my apartment. How can I eliminate them?

Concept #2: Root cause

Solutions can only have long-term effects if the root causes of the problem are identified and attacked.

Most problems are at the end of a long chain of causes and consequences; failing to identify the start of the chain ensures that the problem will come back to haunt you. Think of draining a bathtub without turning off the faucet – it just doesn’t work.

Spraying insecticide on cockroaches that stray into my apartment may help with my inner peace for a while, but that peace will be disturbed again if the source of those cockroaches (the root cause) remains on the face of the Earth.

Concept #3: Issue tree

An issue tree helps you identify all the root causes efficiently and effectively.

In an issue tree, the problem is broken down into multiple branches, each corresponding to a contributing factor. Each branch is in turn broken down into sub-branches. This breaking down allows the problem-solver to pinpoint each and every root cause.

For an issue tree to work as intended, it must adhere to a principle that’s a signature of the consulting world – MECE .

I did not exactly draw an issue to kill the cockroaches, but if I did, it would look like this:

Concept #4: MECE

This acronym stands for “ Mutually Exclusive, Collectively Exhaustive ”, which means there’s no overlap between the branches, and all branches together cover every possibility, i.e there’s no gap.

Besides these basics, the MECE principle actually has several “advanced” rules:

• Parallel items:  Every branch in a MECE issue tree must be on the same logical level.
• Ordered list: The branches should be arranged in a logical order (e.g: A, B, C instead of C, A, B)
• Rule of Three:  The best, most intuitive number of branches in a MECE issue tree is 3. It’s fine to go with 2-4, even 5 can be acceptable sometimes, but an issue tree with 6 branches or more is extremely difficult to work with.
• No interlinking items:  There should be as little interdependence between the branches as possible, to avoid one root cause showing through multiple branches.

This MECE principle is a must-know for every prospective consultant. You’ll be hearing this word a lot in the consulting industry : “I like your idea, but your issue tree is not MECE enough”.

The division of the search into “inside” and “outside” pretty much covered every possible location, and there’s no overlap between them, so it’s MECE.

Concept #5: Hypothesis

A hypothesis, the context of consulting problem-solving, is an educated guess that one certain branch is the most likely to contain the issue tree.

Hypotheses must follow the issue tree, be top-down , and be based on existing information.

Hypothesizing allows the consultant to prioritize the most probable “culprits”, making the problem-solving process much more efficient.

If the root cause is confirmed to be inside one branch, drill down to find it; otherwise, move sideways to another branch on the same level. Rinse and repeat until every root cause is identified.

I noticed that I often saw the cockroaches near the door, coming in, so it would be unwise to hypothesize that the source is inside my apartment. As such, I began my search from the outside.

Concept #6: Data

A hypothesis must always be tested with data – facts and figures related to the problem.

One piece of data standing alone may not yield significant insights; in those cases, we compare them with reference points benchmarks, of which the two most common kinds are “historical” and “competitor”.

The aforementioned piece of data is not enough to verify that the cockroaches come from outside, so I asked my neighbors if they also saw an increase in cockroaches; they mostly said “yes”, so I was able to confirm that hypothesis. Fast forward a short while, I located a site of infestation at the end of the corridor before the building.

Concept #7: Solution

After the analyzing process, it’s time to deliver solutions.

A suitable solution must be actionable – if the proposal is not feasible, it’s as good as useless.

The solutions must attack all the root causes to ensure long-lasting impact – if even one root cause remains untouched, the problem will persist.

In case interviews , you must also pitch your solutions in a structured fashion, by separating them into neat and meaningful categories (usually “long-term” and “short-term”).

I’d love to use a flamethrower and burn those nasty cockroaches, but that would reduce the whole building to ashes, so I had to make do with insecticide (short-term) and cleaning up the place (long-term).

BCG case interview frameworks

Frameworks are off-the-shelf templates to break down problems.

On the one hand, these frameworks, to a large degree, follow the fundamental concepts we’ve just discussed, hence their convenience in case interviews. Most of them are also fairly intuitive. On the other hand, their generic nature necessitates a lot of customizations for consulting work and case interviews, where cases don’t usually fit neatly into the frameworks.

I also wrote another article on  Case Interview Frameworks , with tips and techniques in case interviews, as well as some myth-busting on common misconceptions about frameworks.

Anyhow, here are five frameworks you can use to solve your cases:

• Profitability Framework: Splits Profits into Revenues and Costs; mostly used to mathematically break down problems before switching to qualitative frameworks for solutions.
• Business Situation Framework: Analyzes a company situation in four areas: Company, Competitors, Customers, Products; flexible for many purposes but generic, needs customizations.
• McKinsey M&A Framework: Assesses a proposed M&A on three aspects: stand-alone values of each involving company, their synergy, and “other factors”. MECE and promoting customizations, this is one of the best M&A frameworks.
• 4P/7P Marketing Mix: The 4P analyzes the Product, Price, Place, Promotion for marketing tangible goods; the 7P adds People, Process and Physical Evidence to the mix, meant for service marketing. This framework focuses solely on the marketing aspect, so not suitable for multi-function strategies.
• Porter’s Five Forces Model: Analyzes the industry surrounding a business, on five aspects or “forces” – Suppliers, Customers, Competitors, New Entrants, and Substitutes. Good for getting the “big picture” about the industry and understanding the client’s context.

Along with the frameworks, there are these powerful, universal problem-solving tools which I term “mini frameworks”. Here are five of them:

• External vs Internal: This is a quick and easy method to segment information about a particular entity. The internal branch concerns what’s inside or intrinsic of the said entity, the external branch the outside.
• Qualitative vs Quantitative: This mini-frameworks is mostly meant for evaluations. By dividing items into two MECE groups, it reduces confusion and minimizes the risk of missing an important item.
• Costs vs Benefits: This decision-making tool is pretty straightforward – if the benefits outweigh the costs, you go with that option.
• 2×2 Matrix: The 2×2 Matrix is a decision-making tool where options are examined using two criteria, each of which forms an axis of the matrix.
• SWOT Analysis: This mini-framework is seldom used in case interviews, being too generic; however, it can be used for a quick and easy evaluation of a company’s positioning within the industry context.

BCG case interviews tips

To help illustrate the following tips and techniques, we’ll again visit The Pirate Company. In the Case Interview End-to-End Secrets Program , you can find countless such tips throughout the 10 case videos of the Tips and Techniques package.

Tip #1: Deliver a structured and friendly case opening

Although a case lasts about 30 minutes, the verdict is almost determined within the first 3 minutes. That means if you have a perfect opening, you stand a much greater chance of getting an offer.

Here are seven steps to deliver that perfect opening:

Step 1: Show appreciation

Everyone loves a compliment, so give a sincere one to your interviewer.

“Thank you for this very interesting case, I’m happy to get the chance to solve it”. 

Your interviewer is not HR personnel; he’s spending time and effort on you as a form of goodwill for the company. Those simple, thankful words go a long way. 

This works best at the start, but you should show appreciation throughout the case (e.g.: when the interviewer gives you useful data or feedback).

Step 2: Announce case introduction

Explicitly and concisely announce that you’re going to do the following steps 3, 4, and 5.

“I’m going to recap the case and ask for some clarifications, just to make sure that we’re on the same page. Then I’m going to inform you of my approach to this case.”

This is related to what I term “map habit” which I’ll explain soon enough because it’s a habit you must have during the whole case interview.

Step 3: Recap

Playback the case to make sure you concretely understand it.

There’s nothing worse than realizing you’ve been spending all resources trying to solve the wrong problem; thus, consultants always try to be absolutely clear what the client wants and what they’re facing.

Do the same in the case interview and you’ll get a lot of plus points; make sure you know (1) who the client is, (2) the situation the client is in, and (3) the case questions and objectives.

“So here’s how I understand the case: our client is The Pirate Company, stationed in the Caribbeans, and provides assets removal services; the Company is having negative profits; our objective is to deliver a solution to that problem. Am I correct?”

Step 4: Clarify

Ask questions to clarify any confusing and unclear parts you have about the case.

Most often, there are three kinds of information to clarify at this stage: definitions, time frame and measurement.

“Great, now I’d like to ask three clarification questions:

1. What kind of assets does our client remove for their customer ships?

2. How long has the negative profit problem been going on?

3. How long can our client continue the business with negative profits, i.e what’s the deadline for our solutions?”

Step 5: Announce the case approach

Announce the overall logical flow of the upcoming case.

This logical flow depends on the type of case. The most common type is “problem-solution”, where the flow is (1) break down the problem into small parts, (2) set up the hypotheses, (3) ask for data to test hypotheses, (4) identify the root causes, and (5) deliver solutions.

“For the overall approach, to ensure long-lasting impact for our solutions, I’m going to try and break down the problems into small pieces with issue trees, then drill down to isolate and identify the root causes, while also gathering data to draw actionable solutions.”

Step 6: Align

Remember to check if the interviewer agrees with your approach, at the start and at each key step in the case!

In real consulting projects, managers expect junior consultants to align early and often, because no one wants their team going in the wrong direction for a whole week!

In case interviews, simply ask “Does this sound like a reasonable approach to you?” . Often you’ll get the green lights, however, there is a chance the interviewer will suggest an even better approach!

Step 7: Ask for timeout

If you need time to think, ask for it! This applies not only at the start of the case, but throughout!

“I need some time to collect my thoughts and develop my issue tree, so may I take a timeout?”

Don’t just rush into the case and then later try to fix all the errors you could have avoided if you spent some more time thinking. It’s a really bad habit and no manager wants their junior consultants to act like that in real projects.

Beware though, once you’ve asked for timeout, you need to come back with something worthy; don’t spend 90 seconds just to divide profits into revenues and costs. 

Additionally, this early in the case, don’t drill down; save that for later, because you have yet to get a clue where the problem is. What if you drill down two levels on the Revenue side, just to have the first piece of data informing that the problem is on the Cost side?

Tip #2: Use personal interview scripts

To nail all of these steps and still come about as naturally, as well as save your brainpower for the analysis part, what you’ll definitely need is a personal interview script.

In the Prospective Candidate Starter Pack , I’ve included one such script – written from my own experience at McKinsey and after McKinsey, interviewing hundreds of customers. You can download the whole pack – along with the script, and one case interview example.

Tip #3: Use the map habit to check the case progress

Pause occasionally to summarize where you are, and where you’re going next!

I call it the “map habit” because it’s so similar to using the map when travelling.

This is a habit that I repeatedly stress in the Case Interview End-to-End Secrets Program , because of its importance both in case interviews and in my consulting experience . It gives you a sense of direction as well as authority; additionally, you get plus points in the interview for an organized approach.

Suppose you’ve explored The Pirate Company’s “Revenue” branch, with data suggesting the problem is not coming from that branch, you’re supposed to sum up your findings about the revenue branch up till now then announce you’re going to explore the “Cost” branch in consideration of those findings.

Tip #4: Always speak in a structured manner 

Always speak in a very structured fashion, when you do not, announce in advance.

I can’t stress enough how prospective consultants must be structured in everything they do. Every word they speak must reflect that structured mindset .

Here are three tips for structuring your speech:

• Begin with a summary line, stating the most important takeaway/intention.
• Divide what you intend to say into clear-cut parts. Avoid jumping back and forth between items as much as possible.
• Number your items so it’s easier to keep track, both for you and your interviewer. Even better if you announce in advance how many items you’re going to discuss.

Take a look again at the opening parts and you’ll see these tips being applied.

If you desperately need to speak in an unstructured fashion, just ask “May I think out loud for a short while?” – the interviewer will allow unstructuredness for that mode; however, you do need to restructure your ideas once the “verbal brainstorming” session is over.

Tip #5: Avoid long moments of silence

Don’t allow long, awkward moments of silence in your interviews – ask for timeout or announce think-out-loud mode.

A timeout is a great excuse to think in silence; however, too long and it will backfire, especially if you can’t come up with something worthy of the long wait. 

Use it prudently, and always try to think as fast as possible while still being “correct”.

Thinking out loud is especially good if you need a lot of time to brainstorm, and you want some feedback from the interviewer during the process. Again, however, limit your use of this out-of-jail card; too many “think-out-loud” sessions will create the impression that you’re unorganized.

Tip #6: Always stick to the hypotheses

Always speak with the current hypothesis in mind, and that hypothesis must be in the issue tree.

The whole point of this hypothesis-driven approach to problem-solving is to have your efforts guided by hypotheses and not wasted aimlessly. Drawing out the issue tree and forgetting it, is like buying a car and then going everywhere on a bicycle.

That said, even the best and brightest people forget their hypotheses in the midst of overwhelming data. To avoid such a situation, do yourself a sanity check every once in a while, look back at your issue tree; if what you’re doing doesn’t match your current position on it, go back immediately!

Tip #7: Take notes using three separate sheets – data, presentation, scratch

Use three types of notes for your case interviews: data, presentation, and scratch paper.

When the interview starts, pull three sheets of paper and label them accordingly.

You’ll use the data sheet to jot down and process any data the interviewer gives you, as well as your calculations; the presentation sheets to draft things you’ll say to the interviewer; and the data sheet for anything else you need to write out, such as your ideas when brainstorming.

For one thing, neat notes really help with your thought process, because it eases the storing and arranging of information you receive. For another, you’re showing the interviewer that you’re an organized and careful person.

For the example case, the notes may look like this:

Tip #8: Make the final pitch short and result-oriented

Your final, solution pitch must be concise and result-oriented .

Imagine you’re in the elevator with the client CEO (or in the example case, the Chief Captain) and he asks for your findings – you should be able to deliver it before the elevator arrives at its destination floor! This is a “question” they ask at the end of a case interview .

The pitch should always begin with the root causes, immediately followed by your recommendations – client CEOs don’t have much time to waste on the procedure, so no need to bring it up – and lastly, end your pitch in a client-friendly fashion, saying “We’d be happy to work with you to implement the solutions”. Voila, you’ve nailed that pitch!

Tip #9: Know how you can get stuck in cases, and how to avoid

I’ll point out three common kinds of “stuck” in a candidate-led case, and how to overcome each.

The Data “Stuck”

If you got a piece of data and don’t know what to make of it, ask for benchmarks.

Benchmarks are the easiest way to put data into perspective; the two most common benchmarks for comparison in case interviews are competitor figures and past figures. If the client’s data deviate from industry or historical trends, you know something is off with their business.

Make it explicit to the interviewer that you need the benchmarks to help with the issue tree.

“To see if it’s an external or an internal problem, and therefore locate the potential root causes, I need some data on the revenue of other pirate companies in the Caribbean.”

The Framework “Stuck”

If you don’t know which framework to use, go for “segmentation”

A lot of candidates get stuck after they’ve exhausted the first level of their issue tree. Sure, improving your business intuition helps you avoid this, but it takes time. Sure, learning more frameworks might help, but you will “framework-vomit” if you don’t know how to use them right.

The easy way out in this situation is to see how that item is usually segmented by the client or by the industry. If you’re not sure how they do it, ask the interviewer – remember to state your purpose clearly.

“It seems that the conventional breakdown of revenue and unit sales does not yield significant insights. My experience in the pirate industry is rather limited, so to draw a spot-on issue tree, may I ask how our client segment their revenue?”

The I-Can’t-Find-The-Problem “Stuck”

If you can’t point out where the problem is coming from, something’s wrong with your issue tree.

This is probably the most dreadful one, because you can’t even see clearly where you got it wrong. However, don’t panic – that’s the last thing an interviewer wants to see in a prospective consultant.

There are two possibilities here:

• Your issue tree is not MECE
• Your issue tree is MECE, but it’s set up in a way that doesn’t isolate the problem.

Either way, admit you’re having a problem, and ask for a timeout to fix it. Do it with style, here’s something you can use:

“My analysis seems to go into a dead-end, which means either part of my issue tree is not MECE or my method of breaking down does not isolate the problem. Either way, I’d like to take a timeout to have another look at it.”

Just saying this already scores some points for you, and rest assured, no interviewer will refuse.

An example from End-to-End secrets program

Here’s a candidate-led example case from our  Case Interview End-to-End Secrets Program !

This sample case is a great example of all the techniques I’ve told you about, because while the candidate does have good business intuition, his techniques need a lot of fine-tuning.

Besides what we’ve discussed, the Case Interview End-to-End Secrets Program features countless other instant-result tips and techniques for case interviews.

You have got a really good example, but you still want to practice your own case? 

Book a meeting with former consultants at MConsultingPrep . These coaching experts will practice a specific candidate-led case interview with you, giving you the most detailed and concrete feedback and suggesting the most suitable improvement methods. 

How to prepare for BCG case interviews?

Step 1: familiarize with candidate-led case examples.

Watch examples of candidate-led case interviews to familiarize yourself with the flow of the case, and how to interact with the interviewer.

BCG has several sample cases on their websites:

• BCG Case – Driving Revenue Growth
• BCG Case – Crafting a Distribution Strategy
• BCG Interactive Case Library

Step 2: Practice consulting math

Consultants have to deal with a large amount of quantitative data; therefore,  math skills are a must.

You probably hate math as much as I used to; however, that’s no reason to back down. I have a few personal tips I used to ease up my math practice; try them, you’ll find math much more enjoyable (or less tedious, if you don’t believe math can be enjoyable).

• Use Your Head: Do all your daily calculations mentally unless an EXACT answer is required.
• Flatten the Learning Curve : At the start, a piece of scratch paper and a 5% margin of error really help; once you are confident, discard the paper and narrow down the margin.
• Establish a Routine : Allocate some time for daily practice; this may seem hard at first, but once you’ve overcome the inertia, you can literally feel the improvement.

Step 3: Develop business intuition

As I said earlier, business knowledge and intuition is necessary to win a consulting offer.

Improving this aspect is a gradual process; start early and take your time; slowly, those business insights will become part of your instinct. Here’s how I did it myself:

• Written Sources : I suggest reading business papers daily; you can also visit  McKinsey ,  Bain  and  BCG  websites for their excellent articles. Beware though – it’s not the pages you read that count, but the insights you draw from them.
• First-hand Experience and Observations : Don’t just come to your workplace to work; try to examine what senior managers are doing – what’s the rationale for their decision, and how has it impacted the organization?

Step 4: Learn the fundamentals and frameworks

Master the use of hypotheses , issue trees , MECE principle and the frameworks – they are the backbone of candidate-led case interviews.

At the beginning it may be tempting to focus on the frameworks – if you make this common mistake, be prepared for some very unpleasant surprises in the interview. Frameworks need a lot of customizations to fit with real cases, and to customize effectively you need that fundamental knowledge.

Fortunately, problem-solving fundamentals are something you can practice daily – I already demonstrated how it can be applied to a task as simple as finding lost keys.

Of course, don’t draw an issue tree for all your daily problems – that’s just overkill; but do take a structured approach, and picture an issue tree in your head while searching for your keys.

Step 5: Perform mock interviews

The best way to train on something is to do it.

Find yourself a former consultant to help you practice; they’ve been through countless case interviews, both real and mock, they know what’s required of a candidate, so they’re the best people to run your simulations with.  Connect with experienced coaches here.

Study your cases in the utmost detail. Replay them over and over and over again, take notes of the interviewer’s feedback and look for other areas you can improve.

BCG written case interview

What is a written case interview.

A written case interview is a case interview where you receive the questions and data, as well as deliver your recommendations in written forms of communication. Here are some details about BCG Written Case.

BCG Written Case

Length: 50-60 slides

Preparation time: 2 hours

Interview time: 30 minutes

Product form: PowerPoint slides

(Information acquired from BCG websites, June 2020; may vary depending on office)

As you may have realized through the table, written case interviews test not only your analysis, but also your ability to select relevant data, handle time pressure, and present recommendations. It really does simulate the  daily job of a management consultant , not just focusing on the analyzing process.

Surely, all the principles of  regular case interviews will apply, but how can you effectively showcase the abilities tested uniquely by the written case?

How to nail the written cases

Here’s how you can demonstrate that you possess the qualities tested in written case interviews:

Skim and scan

Skim the data for an overall picture, then scan only for things that back up your analysis.

Waste no time on irrelevant data. Always dive in with a clear idea of what to look for – in this case, data that answers the questions or back up your conclusions.

Since this is a  common speed-reading technique , you can practice it daily. When reading newspapers, for instance, ask yourself questions about the matters discussed, then specifically look for answers in the articles.

Timebox your activities

To ensure effective time management, allocate a precise time limit for each activity.

When that time limit is nearly over, quickly wrap up what you’ve been doing (e.g: skimming data) and move to the next ( structuring the problem ).

In a perfect world, the time limits for all activities together equals the preparation time of the case; however, in such a pressured setting, you are bound to make mistakes, so set aside some time for contingency.

Present recommendations first

Tell them your solutions first, explain later!

Real consultants do it in their work – their chart titles contain the most valuable insights, their presentations and pitches start with the conclusion. Their clients don’t care that much about the procedure – it’s the results that counts.

You are a prospective consultant, so act the same in case interviews, even the regular cases, but especially the written ones.

BCG fit interview

Bcg fit interview topics.

Most fit interview questions at BCG can be grouped into four common topics:

• Why you are interested in BCG/consulting
• Your hobbies and interests
• Your previous job (if you have one)
• Examples of leadership/achieving mentality/problem-solving skills

These topics together aim to assess two things:

• Whether you are “fit” with the organization – personality, motivation, etc.
• Whether you possess sufficient personal experience (i.e leading, handling conflicts, coping with work pressure, etc.) for the consulting world.

Unlike at McKinsey where they focus on personal experience, BCG place more emphasis on the “fit” part. Their interviews are generally less structured.

Why BCG/Why consulting?

For the first topic, the key is to be authentic and detailed .

You’ll almost definitely be asked to explain why you’re applying. When that happens, don’t recite the company’s marketing materials and become the umpteenth candidate with that same generic answer.

Research before you apply, not for the sake of the fit interview, but to thoroughly understand the industry and the companies . Then, pay attention to the unique features of each company, as well as the nature of consulting work, and see how they fit with your own preferences – that will become the basis for your answer.

Hobbies and interests questions

For these questions, implicitly connect your answers with consulting traits .

Don’t just say you like football, say you competed in a local tournament and became the best goalkeeper there (insert quantitative evidence for even better impact). If you play board games, mention that 10,000-member community you founded.

Don’t be afraid of showing unusual hobbies and interests – mine is paragliding, which is not exactly a popular sport in my country. You may pique the interviewer’s curiosity.

However, if your hobbies and interests involve something controversial (political and religious movements come to mind), my advice is to avoid mentioning them at all.

Previous-job questions

If asked about your previous job, you can be more flexible, either mentioning aspects similar to consulting traits , or to BCG cultures (such as when you analyzed your customers to devise better sales pitches, or when your boss allowed you to decide on the monthly sales plan).

However, do keep in mind to avoid negative comments about your former boss or colleagues. Talking behind one’s back is one of the auto-fail mistakes in MBB consulting firms .

Story-telling questions – Showing your consulting traits

The third topic is about telling a story of your consulting traits; which is why you should:

Take a Story-Based approach, not a Question-Answer approach. 

Develop 3-5 well-rounded, detailed stories demonstrating all or most consulting traits (the three key ones being leadership, achieving mindset, and analytical problem-solving). 

In the fit interview , tell those stories from angles that best reflect the traits being asked for.

Many candidates make the mistake of focusing on the possible questions and developing stories specifically answering those questions. The resulting stories are often one-dimensional, reducing the candidate’s flexibility in the interview. 

There are three steps to develop a good fit-interview story:

Lay Down the Content Base

Look back on your past experiences and find stories that best reflect consulting traits (leadership, achieving mentality, problem-solving skills) and your personal values.

List down as many details of your stories as possible, make sure they follow this structure: Problem, Actions, Result, Lesson.

Form the Story Plot

Trim all the unnecessary details, then rearrange and amplify the rest to enhance the drama and to better reflect your traits. If your story is about overcoming politics to unite a team, mention how conflicting interests were destroying all team efforts.

If your stories have highly technical details, try to present them in a way your grandmother understands. Any story will be useless if the listener can’t relate to it.

Add the consulting spirit into the mix by emphasizing the relevant traits, telling your stories in a structured way, explaining all your actions, etc.

Refine Your Style

Tell your story in a style that entertains your listeners and yourself (finding a style will require a lot of practice, so be patient). This sounds really cliche, but if the style doesn’t feel right to you, discard it, you won’t be able to use it in an actual interview anyway. 

Formalize your style. Steer clear of anything that can be perceived as negative and unprofessional: political jabs, self-deprecating jokes, excessive slang use, etc.

Four biggest mistakes in the fit interview

• Faking stories: Be as authentic as possible. The last thing you want is to be perceived as untruthful in an interview – and it’s not that hard to detect fake stories, which have no depth and are full of plot holes.
• Wasting time on  ontext: Be result-oriented even in fit interviews – nobody has time or attention span for unnecessary context. Use just enough context to build tension then quickly move to action and results.
• Repeating stories: Vary your stories as much as possible. That will help you look more experienced in the interviewers’ eyes, and give them a multi-faceted view of the best you.
• Not focusing on oneself: Remember to stress your own value within the team. Teamwork is good, but talking about the team too much makes you sound like an insignificant cog in a machine, and that won’t impress anybody.

For an even more comprehensive guide on consulting fit interviews, see the article on Bain & BCG Fit Interviews and McKinsey PEI .

If you want to learn even more about the case interview and the secrets to landing yourself a consulting offer, subscribe to our Case Interview End-to-End Program !

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Portfolio Management using the BCG-Matrix

Developed by Alexander Michel

The Boston Consulting Group (BCG) matrix , also known as growth share matrix, is a tool to manage a company's business portfolio and derive appropriate actions towards a higher total performance. Depending on the growth rate and market share, each business is individually assigned to one of the four clusters inside the two-dimensional matrix. Based on that, the optimal combination of individual business strategies is developed to manage a company's business portfolio in such a way, that it can make the most out of its opportunities. [1] Initially developed in 1970 by Bruce D. Henderson [2] , a senior partner of the management consulting firm BCG , the concept has been widely applied since then and can be seen as a foundation for similar tools. Although the BCG describes it still as a relevant tool today, the growth share matrix has been criticized by professionals and academics for its limitations and underlying assumptions. The following article will present the matrix developed by Henderson with its foundations and core elements. Hereafter, the application of the tool is shown with its implications for the business portfolio. These serve as a guideline for a company's overall strategy. Finally, limitations of the matrix are discussed based on empirical research and new findings.

Key Assumptions and Core Elements of the Matrix

When the BCG-Matrix was developed, it met a real market need. Based on only a limited amount of input data (relative market share and market growth), senior executives gained a clear picture of their business portfolio in an increasingly complex environment. Furthermore, it could be used to communicate decisions to subsidiaries within the company. [3] At the time Henderson said about the matrix: [2]

Such a single chart with a projected position five years out is sufficient alone to tell a company's profitability, debt capacity, growth potential, dividend potential and competitive strength.

In order to understand this position, the underlying assumptions and core elements of the matrix are presented in the following. Basically, the matrix can be divided into six core elements, each with specific assumptions. [3] [4] A basic model of the matrix is shown in Figure 1 which serves as an illustration for further discussion.

Classification of Businesses into Four Portfolio Categories

Henderson defines the four categories according to their potential for cash generation and cash requirement. These are defined as followed: [2]

• Stars Stars are in the upper left quadrant. Because of their rapid growth they require large amounts of cash, but at the same time they provide cash through their strong relative market position. Usually, these businesses are self-sufficient in cash flow. However, over time market growth will slow down which offers two choices. If stars can hold their market share they might become cash cows and net generators of cash, if they fail to be competitive they become dogs. Only few businesses within a company are stars.
• Cash Cows Cash cows are in the lower left quadrant. In these businesses growth is low but relative market share is high. This translates into businesses which generate far more cash than they require. Cash cows are vital for a company as they pay the dividends, cover the corporate overhead and provide the money for future investments. As with stars, a company usually only owns a few cash cows.
• Dogs Dogs are in the lower right quadrant. Operating in slow growing markets with a weak position, these businesses are known as cash traps as they provide little earnings but at the same time require some cash. Overall, they are worthless and a company should seek to minimize the assets within this category.
• Question Marks Question marks are in the upper right quadrant. With high growth but low market share question marks have the worst cash characteristics. Because of high growth they require huge amounts of cash but only provide very little as their market position is weak. Many businesses within a company fall into this category and key will be if a company can develop these business towards stars or cash cows. However, if this attempt fails, question marks become the ultimate cash trap as they only absorb large amounts of cash throughout their existence. A company has to make thoughtful decisions in which (few) question marks should be further invested and which ones should be liquidated on time in order to save resources.

Strategic Business Units (SBU) and Product Markets

Within the portfolio analysis usually different SBUs are analyzed. These describe a business focused on a particular product-market combination. It is essential that these are mostly independent from each other but have similar structures and resources. This is required to make decisions for each SBU independently without affecting others in the portfolio. However, the definition of SBUs might be challenging, as products within a SBU might have different market growth and relative market shares. Inside the matrix the relative significance of each SBU is displayed by the diameter of a circle, which can be made proportional to either sales or assets. [1]

Relative Market Share and Cash Generation

Based on the experience curve concept , which Henderson introduced prior to the matrix in 1968, it is assumed that the company with the highest market share has the highest profit margin. The reason is, that the stronger the company’s position relative to its competitors, the higher profits should be and the simplest measure of relative competitive position is relative market share. It can be computed by the market share of a business (i.e. SBU) divided by that of the largest other competitor. [1] That means, the higher the relative market share is the more cash the business will generate.

Market Growth and Cash Use

The assumption made here is that market growth relates to the opportunity for investments. Growing business offer the ideal vehicle for investment, as money put into the business will compound over time and provide even higher returns in the future. However, the lager a market is growing the more cash is required to maintain market share and competitive position. Within the BCG-Matrix market growth is the only indicator for the attractiveness of a market.

Balance of Cash Flows

The key concept of the BCG-Matrix is to reach a balance of positive and negative cash flows between the different businesses. As shown before, each field can be defined as a net cash generator or cash user. Therefore, the assumptions regarding the cash situation for each of the four fields is essential that the concept works. Following the matrix, each company should have stars that assure the future of the company with their high share and growth. Secondly, cash cows are vital as they provide the money for future investment and cover today's expenses. Moreover, a selected range of question marks is necessary, as they can be turned into stars when funds are added. Dogs are not necessary at all, they are a sign of failure and should be liquidated.

Product Life-Cycle Stages

Besides an actual cash situation of each segment, these can also be linked to a specific product life-cycle stage. Question marks correlate to products in the introduction phase, where costs are high but sales and profits are low. This implies a strategy of investing in order to gain customer attention and increase market share in an overall growing market. If successfully managed, products enter the growth phase and become stars, where profitability begins to rise through economies of scale and a massive increase in sales. However, more and more competitors enter the market which ultimately leads to price decreases and may pushes profits down. In the third stage, the maturity stage, sales volume peaks and especially the company with the biggest relative market share has a huge advantage. Based on the experience curve effect, a company can harvest profits as it has the highest production volumes and is leading the market. Products in this stage are the cash cows. Lastly, the fourth stage is the saturation and decline stage where sales and profits decrease. The market is rather unattractive and products may get phased out. Companys seek for a squeeze out and divestment strategy, such as dogs are treated.

Application in Practice

Although the matrix requires only few data input and is through its illustrative approach relatively easy to understand, there are some elements which need special attention. Also when the tool is applied, it is of vital importance that the right strategic decisions are derived and finally executed. Based on an exemplified case study these will be shown and further discussed.

Constructing the Matrix

Despite the core elements of the matrix are already discussed, special attention has to be given to the scaling of axes and position of the horizontal and vertical line dividing the matrix into its four quadrants. For the vertical axis (growth rate) a continuous scale is used. According to Henderson and Hedley the line separating the vertical axis should be at a growth of 10% [2] , as companies tend to use this figure as discount rate in times of low inflation. This means that any growth above 10% is the area where investment becomes especially attractive. [1] However, in some literature it is recommended to set the line equal to the expected inflation adjusted growth in gross national income (GNI) . [4] One has to be cautious which scale to use, as it might have serious implications if a business is for example a star, a cash cow, a dog or a question mark. For the horizontal axis (relative market share) a logarithmic scale is used to be consistent with the experience curve effect. [1] It is separated at 1.0, as only the relative market share of the largest competitor can be left of this line and all others are below this value by definition. [2] However, it has to be noted that these guidelines serve only as an approximate guide but turned out to work well in practice. [1] Still, adaptations may have to be made to gain correct results and derive appropriate strategic decisions for the business portfolio. After building up the matrix with its four quadrants each SBU or product can be plotted inside depending on its relevance in sales or assets.

Exemplary Use and Strategic Implications

The portfolio in Figure 2 shows exemplary SBUs of a company. The different businesses are assigned to one of the four quadrants and the area of each circle correspondents to the respective volume in total sales. It can be seen that the portfolio is strong in terms of a large cash cow (Product 2) and a promising star (Product 3). Moreover, the company has quite a few question marks (Product 4 and 5) but also a dog (Product 1). The key essence is that each business requires different strategy objectives in order to make the most out of its opportunities. Thus, it would be fatal if one overall goal would be defined for all businesses. The strategic implications therefore would be:

• Cash cows: Maintain current profitability.
• Dogs: Expected to generate some profits, but may be squeezed out and divested.
• Stars: Keep (and expand) current market share.
• Question marks: Invest in some to gain market share and sell others for cash.

Especially the strategy for the question marks is of extraordinary importance. If the company chooses to invest in all of them, current funds will be not sufficient to develop them towards stars and further on to cash cows. Finally, the company would have a large amount of dogs in their portfolio that failed to gain market share and suck the company’s cash without providing any net return. Henderson described this as the sequence of disaster (see Figure 4). [3] Instead, the company should choose to invest in only a few promising question marks and cash out the remaining ones on time. This will lead to a success sequence [3] in which question marks provide the future net cash flow. Figures 3 (Success Sequence) and 4 (Disaster Sequence) show how the company could have developed from a three years’ perspective. The results can be described as followed:

• Success Sequence: In the success sequence the company took the right decisions for managing the business portfolio. Product 2 (cash cow) provided sufficient funds to develop Product 3 (former star) towards a strong market leader. Although the market is slowing down, Product 3 takes advantage of its strong market position and emerged towards a cash cow. It even contributes more to the total sales than Product 2 now. In terms of the question marks, the company followed two approaches. Product 5 was promising but it required huge investment, so it was decided to sell it for a good share. It is no longer part of the business portfolio. Instead, Product 4 was developed with large amounts of cash towards the new star of the company. Although market growth slowed a bit down, it could significantly increase its market share. Through the cash out of Product 5 and the positive cash flow from the cash cows, the company even had enough funds to innovate and develop the new question marks, Products 6 and 7. Unfortunately, it was not possible to sell Product 1 (dog), so it was decided to cut investment down. This will lead to a slow death without compromising future success of the company.
• Disaster Sequence: Instead of developing and applying a customized strategy for each product, the company decided to distribute investments equally among the different products. According to the model, this leads ultimately into a disaster sequence. Although Product 2 is still the leading in its market, it suffered under poor management and lost some of its market share. Thus, it provided less net return to the company. Even worse the situation is for Product 3 (star). Competitors were more aggressive and gained market share. If no immediate action is taken, it will fall behind further and end up as a dog. This is what happened to Product 4 and 5 (former question marks). Management was not able to commit itself towards a clear strategy in which products to invest. So funds were shared among them, which resulted in a failed conversion towards a star for both of them. Even worse, they required so much cash that research and development expenses were cut down and no new products are in the pipeline. Even Product 1 (dog) received some investment, however it still requires more cash than it contributes. In the future it cannot be expected that the market growth will increase, but the current leader will rather take advantage of its strong position.

This case study provides a good example in how to use the matrix right and which decisions should be taken in order to lead the company’s business portfolio in a success sequence and make the most out of its opportunities.

Relevance in Industry

According to BCG it was estimated, that between the end 1970s and early 1980s the BCG Matrix was used by around half of the Fortune 500 companies. [5] At this time the matrix was at the peak of its success and well known in industry and education. It can be seen as the most successful and well known portfolio management tool. [3] Today, BCG describes the growth share matrix as a classic tool that remains relevant for companies to drive the strategic experimentation required for success in unpredictable markets. [5] The success of the matrix was lifted by different reasons, which can be described as followed: [3]

• At the time research (PIMS study) showed a correlation between market share and profitability which supported the assumptions of the matrix.
• The matrix has an intuitive appeal, is highly figurative and does not require an extensive manual.
• Strategy and portfolio planning was simplified, as alternatives, such as NPV or risk analysis, were difficult to carry out and called for extensive data input.
• The strong bonds between BCG and industry. So was the director of Mead Paper, where the first successful study was carried out, also chairman of BCG’s parent company.
• The successful praise of the tool by BCG and the debate in business and academia increased its publicity and level of application even further.

However, academic evaluation of the matrix and criticism lead towards a decrease in application. As an example Kotler and Keller decided to delete the BCG Matrix (and other Portfolio Management Tools) in their 12th Edition from their popular Marketing Management book. [4]

Limitations and Critical Reflection

Due to its popularity, the BCG Matrix was subject of extensive research and empirical studies to investigate its usefulness. The following quote of Bruce D. Henderson shows how he changed his opinion about the matrix and sees it after time more as: [3]

a milestone on the search for insight into business system dynamics, but certainly not the end of the road.

In research, the matrix was criticized for both: its underlying assumptions and its results when applied in practice. All of the matrix six core elements with their assumptions received some criticism, [3] [4] as they were believed to be too simplified or even misleading. In the following these will be examined:

• Classification of Businesses into four Portfolio Categories: Although the classification in four categories creates simplicity, it also leads towards a black-white thinking without an area in between. It may be unattractive for a manager to lead a product that is classified as a dog and by modifying the axis, results can differ widely.
• Strategic Business Units and Product Markets: A core assumption of the matrix is that SBUs can be seen independently from each other. This neglects synergies between the products, as a cash cow may profit from a dog. Furthermore, these synergies are often seen as a reason to bundle different products within a company’s business portfolio.
• Relative Market Share and Cash Generation: Measuring a company’s profitability through its relative market share solely focuses on a strategy of overall cost leadership and neglects other strategies such as differentiation or focus. However, these might be more profitable. Even BCG admits that nowadays market share is no longer a strong predictor of performance. [5]
• Market Growth and Cash Use: Inside the matrix market growth is the only indicator for the attractiveness of a market. This might be not always the case, as other indicators such as competitiveness, regulation or innovation are not considered. In a case study about the airline industry the author concludes Growth tells little about attractiveness. [6] The airline market is known for its strong growth over decades but also for its low profitability and high competition.
• Balance of Cash Flows: Inside the matrix each quadrant is a positive or negative cash flow assigned. However, case studies showed that actual cash flow patterns can deviate from those supposed by the BCG. [6] The assumption that the market leader in a slowly growing market (cash cow) always has the highest profitability and is generating a net cash flow can therefore not hold. [4] Furthermore, the matrix implies to reach a balance of cash flows but this excludes the possibility of external investment. In the matrix funds are only generated inside the company.
• Product Life-Cycle Stages: The link of the four quadrants is criticized as opportunistic, as BCG only tried to implement a popular theory (product life-cycle stages) at the time into their matrix. [3] Life-cycle stages can vary in their length and the proposed strategies by BCG may even harm current businesses. Studies have shown that at least the proposed strategies for dogs often failed to be successful. [4]

Taking into account the deficits one should be aware of the limitations this tool has. So far there is no empirical study that supports the usage of the BCG Matrix, [4] yet it is still applied in industry. But instead of banning it from the syllabus, the matrix limitations should be shown to prevent its misuse and application at all. Ultimately, the BCG Matrix success can be seen as a case history in successful innovation and diffusion of a particular analytical framework. [3]

Annotated bibliography

• ↑ 1.0 1.1 1.2 1.3 1.4 1.5 Hedley, Barry (1977). Strategy and the "Business Portfolio", p. 9-15. Annotation : Hedley, a director of BCG at the time, describes the importance of portfolio management and how the growth share matrix can be used to increase a company's performance.
• ↑ 2.0 2.1 2.2 2.3 2.4 Henderson, Bruce D. (1970). The Experience Curve - Reviewed IV. The Growth Share Matrix or The Product Portfolio. Annotation : In this article Henderson describes the initial concept of the growth share matrix and outlines the basic underlying assumptions. However, Henderson and employees of BCG developed the matrix further with minor adaptations until 1973.
• ↑ 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Morrison, Alan and Wensley, Robin (1991). B oxing up or Boxed in?: A Short History of the Boston Consulting Group Share/Growth Matrix. Journal of Marketing Management, 7, p. 105-129. Annotation : Besides describing the history of the BCG Matrix, the authors also explain the core elements, its application in US industry since the 1970s and evaluate academic criticism. The paper can be seen as one of the most comprehensive works about the tool.
• ↑ 4.0 4.1 4.2 4.3 4.4 4.5 4.6 Drews, Hanno (2008). Farewell to the Growth Share matrix after more than 35 years of usage? A Critical examination of the BCG Matrix. Zeitschrift für Planung & Unternehmenssteuerung, 19, p. 39-57. Annotation : Drews gives a short overview of the BCG Matrix and examines empirical research about the matrix. Based on academic papers and a self-conducted case study on the German airline Lufthansa, he concludes that due to its limitations the BCG Matrix should not be applied.
• ↑ 5.0 5.1 5.2 Reeves, Martin et al. (2014). perspectives – BCG Classics Revisited – The Growth Share Matrix. Annotation : In this article Reeves, a senior partner and managing director of BCG, takes a look back on the matrix and presents also some critical evaluation. However, it is concluded that the tool is still relevant today if adaptions for measuring competitiveness are made.
• ↑ 6.0 6.1 Thomas, Mike and Lange, Peter (1997). A Portfolio Management Approach to Strategic Airline Planning. Europäischer Verlag der Wissenschaften, Bern. Annotation : The authors analyze different strategic portfolio tools, such as the BCG Matrix, and apply these in the airline industry. For the BCG Matrix the authors identify several weaknesses and its non-applicability for the airline industry.
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