The BCG matrix does so by plotting a business’s products or SBUs on a four-square matrix. The quadrants of the BCG Matrix are split into the following four categories: The y-axis represents the market growth rate and the x-axis relative market share.īy placing their business offerings into one of these four categories, companies determine where resources should be allocated to generate the most value or which to cut loose and minimize losses.

Question marks (high growth, low share).

Products with relatively low-growth rates but with large market shares are known as “cash cows”. Typically located in the lower-left quadrant, cash cows are a company’s flagship products in mature markets.Īs such, little investment is required to fight off competition making these some of the most profitable assets. Companies should therefore milk their cash cows and divert funds to more experimental projects, i.e. Products with the lion’s share of a fast-growing market are known as “stars”. Located in the upper-left quadrant, stars generate a lot of income, but in order to fight off competitors and perhaps even increase their market share, they’ll still require significant cash investment. If a star continues its position as the market leader for an extended period of time, it will fall into the cash cow quadrant, as market growth begins to decline. Products in the “question mark” quadrant compete in a r apidly growing market with little to no market share. However, if managed effectively, question marks have the potential to grow into future “stars” (literally 😅).

Of course, the opposite is also true – when managed poorly they could drop down into the “dog” quadrant. These products are typically the most challenging for businesses as initially, they’ll require a lot more cash investment than they can generate if you hope to increase their market share.

Investments in question marks are typically funded by cash flows from the cash cow quadrant.įinally, products within this quadrant hold a low market share in a slow-growth market. In other words, these are the products that break-even, neither creating nor consuming large amounts of cash. Therefore, businesses typically want to liquidate or divest money from dogs into more promising ventures – gradually phasing out the product. However, they do provide a certain balance and stability to your portfolio, so further investigation should be undertaken before prematurely killing off the unit.

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