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What is BCG Matrix? The Boston Consulting Group’s product portfolio matrix, i.e., BCG matrix is a marketing tool widely used by numerous brands. The purpose of this tool is to help these brands identify changes in their products, contributing to the organizational profits. The matrix was developed by the Boston Consulting Group in 1968 to help the companies realize their potential. It primarily relies on two factors - Relative Market Share and Industry Growth Rate. The graph developed with the help of these two factors allows companies to produce further investment strategies.

Quadrants of the Matrix Depending on Market Share and Growth Rate, all the products of a brand are classified under four quadrants. These four quadrants are shown in the next slide.

1. Stars These are the products possessing high market share and maximum cash inflows. For example, most of the monopolies come under this category. The reason behind their massive consumption of cash is high growth rates.

2. Cash cows As the name suggests, Cash Cows are somewhat related to generating cash and counted among the most profitable brands. Thus, being a leader in the market, cash cows are known to produce more cash than they consume.

3. Dogs The products having both a low market share and a low growth rate are considered as dogs. These products are incapable of earning or consuming cash as they are not suitable to invest in due to their negative cash returns.

4. Question Marks The products under this segment possess higher growth rates, but a low market share. These products demand a much closer consideration as they consume higher cash against minimum returns.

Strategies using the BCG Matrix After learning the place of different products in the market following the quadrants of the matrix, you can evaluate them individually. Here's an image that shows the study of four subjects Nescafe Kitkat Maggi Milkybar where, Nescafe has the highest market growth and share followed by Kitkat, Maggi, and Milkybar.

The four most effective strategies based on BCG matrix analysis are: 1. Build It emphasizes the idea of boosting investment in a product, leading to an increase in its market share. An approach like this allows you to convert a question mark into a star and, finally, a cash cow.

BUILD

2. Hold In the case where investing in a product becomes challenging, you can hold it in the same quadrant and leave it untouched.

3. Harvest This approach allows you to extract the maximum cash flow from the product by cutting the investment. Harvesting guarantees an increase in the overall profitability of the company.

HARVEST

4. Divest The idea of divesting suggests you withdraw the money already stuck in the business before making any further investments. This type of approach is best suited for dogs.

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