Strategic Frameworks BCG Portfolio Matrix
The Boston Consulting group’s product portfolio matrix is designed to help businesses consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or develop products. It is also known as the Growth/Share Matrix and it tends to be more relevant to larger businesses with a larger portfolio of multiple products/services and markets.
However, smaller businesses can use similar portfolio thinking to their products or services to boost leads and sales and prioritize resources. This framework was once used widely but has since faded in popularity as more comprehensive models have been developed. It is often recognized as too simplistic and it can be difficult to classify products in smaller businesses where the relative market share is too small to quantify.
These are products with low growth or market share and limited potential to achieve leadership or become stars. The usual advice in dealing with Dogs is to aim to remove them from your product portfolio as they are a drain on resources. However, this can be an over-simplification since it’s possible to generate ongoing revenue with little cost. Before divesting Dogs, analysis should be done to fully understand the circumstances driving the product/services standing – why is it considered a Dog and what would need to be true for it to become a cash cow or star?
These are products in high growth markets with low market share and low growth rates relative to competitors. Question Marks are growing rapidly and thus consume large amounts of cash but because they have low market shares they do not generate much cash. As the name suggests, it’s not known if they will become a Star or drop into the Dog quadrant. These products often require significant investment to push them into the Star quadrant. The challenge is that a lot of investment may be required to get a return. One way to deal with Question Marks is to engage in smaller market tests to see if it is realistic to move these products/services into the Star quadrant.
Stars are considered products in high growth markets with high market share that continue to demonstrate growth. While Stars produce a lot of cash they also consume large amounts of cash. These products can be the market leader although they often require ongoing investment to sustain success. They generate more ROI than other product categories. These products/services often attract the attention of competitors looking to take advantage of the growth in the market
Products in low growth markets with high market share. The simple rule here is to Milk these products as much as possible without killing the cow! Often mature, well-established products reside in this quadrant. Care should be taken to nurture Cash Cows with some level of optimized support so they continue to provide cash to the organization. Eliminating all support to maximize cash return is a sure fire way to turn Cash Cows into Dogs over time.