Boston Consulting Group Growth Share Matrix (BCG MATRIX)
• The BCG matrix based on product life cycle theory was developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s. It has 2 dimensions: Market Growth Rate and Relative Market Share. It is based upon the simple observation that company’s business unit can be divided into 4 different categories: Stars, Cash cows, Dogs and Question marks.
• A company operates in various businesses or markets. Each of its businesses operate in different conditions. The corporate has to realize that each of its businesses will earn different amounts of profits and will require different amounts of investments. The corporate should learn to expect different amounts of profits from its different businesses and should invest in them depending on their requirements..
• In the BCG matrix, market growth rate is shown on the vertical axis and indicates the annual growth rate of the industry in which each product line operates. It is used as a proxy for mar