What is BCG Matrix?

Samuel Monse

Samuel Monse

16.11.2022
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Updated: 17.11.2022

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The BCG matrix is a tool used in business planning that provides a view of how a company's products or services compare to each other in terms of their market share and profitability.

BCG matrix can help marketing managers decide which products or services to focus on, based on their relative market share and profitability.

The matrix consists of four quadrants

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  • Stars. Products or services with high market share and high profitability are stars. They are typically high-growth products or services that generate a lot of revenue and profit for the company.
  • Question Marks. Products or services with high market share but low profitability are question marks. These products or services may be struggling to make a profit, and they may not be generating a lot of revenue for the company.
  • Dogs. Products or services with low market share and low profitability are dogs. They typically generate very little revenue and profit for the company.
  • Cash Cows. Products or services with low market share but high profitability are cash cows. They typically have stable sales and generate a lot of profit for the company.

To calculate the position of the company in the BCG matrix, you need to know the market share and growth potential for each of its products. You can find this information in financial reports or market research studies.

Once you have the market share and growth potential for each product, you can use the BCG matrix formula to calculate each product's BCG. Then, you can plot the products on a BCG matrix chart.

In order to plan the company's strategy according to the BCG matrix, marketing managers need to first identify which products or services fall into which quadrants. This can be done by calculating the market share and profitability of each product or service.

The advantages of using the BCG matrix are that it can help companies prioritize their resources and make decisions about which products to invest in. The matrix can also help companies determine whether they should focus on growing their existing products or developing new products.

The BCG matrix has a few disadvantages. First, it can be difficult to determine which quadrant a product belongs in. Second, the matrix can lead to decision-making paralysis, where companies are so afraid of making the wrong decision that they don't make any decisions at all. Finally, the BCG matrix does not take into account the cost of products or services.

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