By assigning each business to one of these four categories, executives could then decide where to focus their resources and capital to generate the most value, as well as where to cut their losses. The Growth Share Matrix table is split into four quadrants. The growth–share matrix thus offers a "map" of the organization's product (or service) strengths and weaknesses, at least in terms of current profitability, as well as the likely cashflows. These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and ca… The best evidence is that the most stable position (at least in fast-moving consumer goods markets) is for the brand leader to have a share double that of the second brand, and triple that of the third. The vendor, who has most of his (or her) products in the 'cash cow' quadrant, should consider himself (or herself) fortunate indeed, and an excellent marketer, although he or she might also consider creating a few stars as an insurance policy against unexpected future developments and, perhaps, to add some extra growth. The market leader would have greater experience curve benefits, which delivers a cost leadership advantage. The theory behind the matrix assumes, therefore, that a higher growth rate is indicative of accompanying demands on investment. The Life Cycle-Competitive Strength Matrix was introduced to overcome these deficiences and better identify "developing winners" or potential "loosers". The reality is that it is only the 'cash cows' that are really important—all the other elements are supporting actors. Although it is necessary to recognize a 'dog' when it appears (at least before it bites you) it would be foolish in the extreme to create one in order to balance up the picture. The growth share matrix was created in 1968 by BCG’s founder, Bruce Henderson. Each of the four quadrants represents a specific combination of relative market share, and growth: As can be seen, product value depends entirely on whether or not a company is able to obtain a leading share of its market before growth slows. Using the Boston Consulting Group (BCG) approach, a company classifies all its SBUs according to the growth-share matrix. On the vertical axis, the market growth rate provides a … The growth–share matrix (aka the product portfolio matrix, Boston Box, BCG-matrix, Boston matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that was created by Bruce D. Henderson for the Boston Consulting Group in 1970 to help corporations to analyze their business units, that is, their product lines. At the height of its success, the BCG Matrix was… [1] If used with this degree of sophistication its use would still be valid. As originally practiced by the Boston Consulting Group,[9] the matrix was used in situations where it could be applied for graphically illustrating a portfolio composition as a function of the balance between cash flows. On the horizontal axis, relative market share serves as a measure of company strength in the market. The exact measure is the brand's share relative to its largest competitor. The growth-share matrix defines 4 types of SBUs. The BCG Matrix, also known as the Growth Share Matrix, was created almost five decades ago by Bruce Henderson, founder of Boston Consulting Group. [4], Another reason for choosing relative market share, rather than just profits, is that it carries more information than just cash flow. Brand leaders in this position tend to be very stable—and profitable; the Rule of 123. The growth share matrix is a framework first developed by the Boston Consulting Group (BCG) in the 1960s to help companies think about the priority (and resources) that they should give to … It helps you compare relative attractiveness of different growth vs share solutions. The growth share matrix—put forth by BCG founder Bruce Henderson in 1970—remains a powerful tool for managing strategic experimentation amid rapid, unpredictable change. The reason for this is often because the growth is being 'bought' by the high investment, in the reasonable expectation that a high market share will eventually turn into a sound investment in future profits. The portfolio composition is a function of the balance between cash flows. All products will eventually become either cash cows or pets. BCG.com will work better for you if you enable JavaScript or switch to a JavaScript supported browser. It is a table, split into four quadrants, each with its own unique symbol that represents a certain degree of profitability: question marks, stars, pets (often represented by a dog), and cash cows. The growth share matrix is, put simply, a portfolio management framework that helps companies decide how to prioritize their different businesses.