BCG or the growth-share matrix are the same thing. The BCG stands for Boston Consulting’s Group portfolio. This is a very useful and nice overview of the marketing portfolio of a company. In order to understand the BCG, you should think of it as a square that is divided into four equal fields. This square grid has a vertical and horizontal axis. A vertical one shows high and low market growth rate, while the horizontal one shows high and low relative market share. In other words, vertically, you show the cash usage, while horizontally, you show the cash generation. This makes four fields in the BCG matrix. Their names are: Star, Question Mark or Problem Child, Cow and Dog. Here is what you need to know about each of them.
Position in BCG matrix: Star is situated in the upper left corner. This makes it high on both the cash usage and cash generation.
Characteristics: Star requires investment and it gives back the profit. The income generated is not sky high, but it is stable and long-term income.
What to do about them: It is always important to have a Star in your range of products. If you can, invest in them and keep them for constant income that you can rely on.
Question Mark or Problem Child
Position in BCG matrix: It is in the upper right corner, which makes it low on cash generation and high on cash usage.
Characteristics: The symbol says it all. This product can go both ways and it has potential. However, the potential can turn out to be a wrong investment.
What to do about them: This is usually a product that can go both ways and become a failed project or a total win. Usually what makes the difference between these two options is the amount of money that you invest in it. It should be dealt with carefully.
Position in BCG matrix: Cow is in the lower right corner of the matrix. This means that it is low on the line of cash usage and high in the cash generation.
Characteristics: This is as good as it gets. The investments in Cow are not demanding and they are more than rewarding. Cow provides the steady high profit.
What to do about them: This should be maintained for as long as it can. Invest in it and keep it alive for as long as you can do it.
Position in BCG matrix: Dog is on the lower right corner of the matrix. It is low on the cash usage and low on the cash generation.
Characteristics: The earnings from Dog product are not stable and they are quite low. They are simply not worth the investment in them and the time.
What to do about them: If you are sure that they are staying in this category, it is best that you ditch them.
With this, a little bit simplistic way of looking at the company products and their success, you can plan a long term strategy and the way your company needs to move on in the future. However, make sure that you have taken all the significant factors into consideration before marking a product as a certain type in the matrix. Think twice before you do it.
This was a guest post by Diana Smith. Diana is a blogger interested in business promotion and marketing activities. She is a regular contributor to several business blogs.
Did you find this useful? Feel free to bookmark or post to your timeline.