It’s a tool for portfolio analysis where we have to decide whether we should add/ invest in a company/ products to our existing portfolio or to divest any existing company/ product.
BCG Matrix will help us to make the above decision by analysing growth rate and current market share.
According to, BCA growth is seen as the best measures of market attractiveness and our market share will give an idea of our own competitive strength.
1. Dog (Low market share and low growth):
This type of products usually affects negatively to the cash flow.
Unless, a company have some other strategy, it should be liquidated if there are fewer prospects to gain market share.
We should reduce the number of dogs in our portfolio.
Sometimes, our product can become dog by our own mistakes like high cost, poor quality or ineffective marketing.
2. Problem Child (Low market share and high growth):
There is very high growth prospect in industry but because of some reasons we are having low market share.
So if we apply right strategy then we still can increase our market share.
But before that we have to analyse the product and market and have to decide whether we should invest more to gain market share or divest ourselves.
We can change our product/ positioning/ strategy/ pricing to gain market share.
3. Star (High market share and high growth):
A star represents the best future prospect for organisation.
They may generate huge cash but because of fast growing market and entry of new entrants, star requires huge investment to maintain their lead.
Once industry matures, star will become Cash Cow.
4. Cash Cows (High market share and low growth):
Here the period of high growth is ended and market is now saturated/ matured and that’s why the market is unattractive to new entrants and existing competitors.
But for us it will generate excess cash because of high market share.
Here we have to defend our market share but should not invest more. We should take cash whatever is generated and should invest in star or problem child.