The BCG matrix, a framework created by Boston Consulting Group, classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share).
The basic idea behind it is the bigger the market share a product has or the faster the product's market grows the better it is for the economy.
The four categories are:
1. Dogs: These are products with low growth or market share.
2. Question marks or Problem Child: Products in high growth markets with low market share.
3. Stars: Products in high growth markets with high market share.
4. Cash cows: Products in low growth markets with high market share
As with any marketing model, the BCG works in some situations but not in others. It offers a valuable way to assess a company's offerings as far as which products to promote and which ones to cut, but the "experience curve" profit increase does not apply to all situations.
It does not take into account outside factors such as supply shortages that can affect the company's production costs and overall profits. Combining the BCG model with other marketing models can give a broader view of how marketing efforts for a particular product will affect a company's overall cash flow.
Learn more about the BCG Matrix model from sources below:
www.strategicmanagementinsight.com
www.valuebasedmanagement.net
www.smartinsights.com
smallbusiness.chron.com