Market-share, market-growth matrix

The market-share, market-growth matrix, created by the Boston Consulting Group, is a model used by companies to evaluate components (business units or PRODUCT groups) of their organization. This model allows firms to classify business units within the firm based on the company’s market share (high or low) and industry-growth rate (high or low). Market share is the percentage of market sales a company controls. Market growth is the annual percentage growth in sales for that market category. As shown below, the matrix classifies company components into four categories: colorfully labeled stars, cash cows, question marks, and dogs. Stars represent high industry-growth rate and high market-share parts of a company’s business. Almost every business involves more than one product. Stars are the firm’s leading products with the greatest potential for growth. Like movie stars, a company’s stars are pampered; additional RESOURCES are usually allocated to parts of the company that have the greatest potential to provide growth. In large CORPORATIONs, future CHIEF EXECUTIVE OFFICERs often rise through the star units of the organization. Cash cows are parts of a company that have high market shares but are in low-growth markets; they are typically the mature parts of a company’s business—i.e., well-established customers in slow-growth markets. Because cash cows provide little growth opportunities, managers “milk” the PROFITs from them to invest in other parts of the company. Most alcohol and tobacco products are mature products with slowly growing markets. The well-established companies in these markets are using the revenue from their cash cows to expand into other food and beverage markets. Question marks, sometimes referred to as problem children, are business units with low market shares in highgrowth markets. These parts of a company provide potential based on high market growth but are not currently living up to their potential. Managers closely evaluate question marks, deciding whether to invest additional resources to improve sales and profits or liquidate or divest that part of the company. Dogs are parts of a company with low market shares and low growth. MANAGEMENT questions regarding dogs include whether this part of the company can become profitable and if not, how to get rid of it. Dogs rarely get infusions of new CAPITAL. Instead, COSTS are often cut in attempts to make this part of the business profitable.