Framework library · Growth strategy
BCG growth-share matrix
The growth-share matrix plots each business or product line by how fast its market is growing and how its share compares with the largest competitor. It is a tool for allocating cash across a portfolio: the businesses that generate more than they need fund the ones that need more than they generate.
Use it when
- You run several businesses or product lines and need to decide which to fund, hold, harvest or exit.
- Cash is constrained and the question is where the next dollar does most.
- You want a common picture of the portfolio before an annual planning round.
Avoid it when
- The businesses share costs or customers so heavily that one cannot be judged apart from another.
- Market share does not drive cost or profit in your industry. The matrix assumes the experience curve: more share, lower cost.
- You have one product. Use a growth tool such as the Ansoff matrix instead.
How to run it
Define each market narrowly enough to mean something
Share of "telecoms" means nothing. Share of fixed wireless in rural Texas might. The definition decides the answer, so write it down.
Find market growth
Annual growth of the market itself, not your revenue. The classic dividing line is 10%. Use a line that fits your industry and say why.
Work out relative market share
Your share divided by the share of the largest competitor. Above 1.0 you lead; below 1.0 someone is bigger. The axis runs from high on the left to low on the right.
Plot with revenue as the bubble size
Stars (high growth, high share) need cash to keep up; cash cows (low growth, high share) generate it; question marks need a decision; dogs need a reason to keep.
Write the cash flow direction
For each business, mark whether it is a net source or a net user of cash, and whether that is what you want.
Decide, then check against reality
A dog can be a profitable niche, and a cash cow can be milked into decline. Test each conclusion against the business's own numbers.
Work through it
Answer the questions below, or load the worked example to see a finished one. The drawing updates as you type. Export the result as a PowerPoint deck, a Word document, an Excel workbook, a PDF or plain text.
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Mistakes to avoid
- Defining markets to make a business look like a star.
- Starving question marks by default. Some are the next stars and need investment now.
- Using the four labels as verdicts. They describe cash flow, not quality or people.
Where it comes from
Bruce Henderson, "The Product Portfolio", BCG Perspectives, 1970, building on the experience curve work at the Boston Consulting Group in the 1960s. Source.
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