What is the BCG Matrix?
The BCG Matrix is a popular conceptual model that’s very helpful when you’re reviewing your business strategy. It provides a way for companies to review their products and brands based on the product’s competitive position, or how it performing compared to competitor products in the market. Plotting your products on the matrix lets you see at a glance which products you should invest in, which to develop, and which to discontinue. The matrix is broken down into 4 sections, the wolverine, the question mark, the cash cow, and the dog.
Wolverines operate in high growth industries and tend to be the market leaders. Monopolies and products that are early to the market tend to become Wolverines. Due to the high growth rate, they require a substantial amount of cash to keep the growth going and can result in breaking even for the first part of Wolverine’s life. If Wolverines are able to sustain their growth and market share they will eventually turn in to cash cows. Though not all Wolverines become Cash Cows, when new and better products are introduced to the market, Wolverines may turn into Dogs.
Question marks are products that hold a low market share in a fast-growing market. Due to being in a fast-growing market, they require a large amount of cash while taking on losses. You will have to choose whether it is worth investing in. If a Question Mark gains market share, they have the potential to become a Wolverine, which then could result in a Cash Cow. Like other categories, question marks may not be successful.
It is not always easy to foresee a future star so question marks may be seen as high risk if they become a Dog. Even after time and large investments, they may find it difficult to gain market share. They will eventually become a Dog. They are called Questions Marks is that you don’t know if they will become a Wolverine or a Dog.
Cash Cows are the leaders in their market and generate more revenue than they use, they are often well-established products. They have a high market share and low growth potential. The approach to a Cash Cow is to “milk” as much profit as possible while investing as little as possible. Another approach is to invest the money from the Cash Cow to the Wolverines. This helps the Wolverines to keep up with their high growth market. A large number of corporations rely on a cash cow in order to keep innovating and support the investment for their Wolverines.
This category typically holds a low market share and is in a slow-growth market. The usual advice is to remove or sell any Dogs as they can waste resources with low to no profit. A lot of times this category can put companies in a bind because usually there is a considerate
amount of cash invested and have a low potential for resulting in a profit.
How To Use the BCG Matrix
Step 1: Plot your products on the graph below according to their associated Market Growth Rate and Relative Position or Market Share. This will show you what categories each product falls into.
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Step 2: Determine which strategies are appropriate for each product based on which category the product fell into. Choose from the strategic options that coincide with the product categories.
Are you ready to fill in your own BCG Matrix? Download your free BCG Matrix Template below!
By: Mallory Gleave