Business Strategy Report: BCG Matrix Analysis and Application

This report provides an analysis of the Boston Consulting Group (BCG) Matrix, a portfolio management tool developed in the 1970s. The report explains the matrix's purpose: to prioritize products within a business unit based on market share and market growth. It details the four segments of the matrix: Stars (high market share, high growth), Cash Cows (high market share, low growth), Dogs (low market share, low growth), and Question Marks (low market share, high growth). The report explores the strategies associated with each segment, including investment, maintenance, and divestment strategies. It also highlights the benefits of the matrix, such as its use in evaluating product portfolios and its applicability to large companies. Finally, it acknowledges the limitations of the BCG matrix, such as neglecting synergistic effects and providing unclear market definitions, offering a comprehensive overview of the matrix's strengths and weaknesses.

Running head: BUSINESS STRATEGY
Business Strategy
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Author Note

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The Boston Consulting Group (BCG) Matrix is also known as the Portfolio Management
tool, which was developed in the 1970s. The main purpose of this matrix is the determination of
the priorities that will be given to the products in a business unit. For the companies, to ensure
that their products have a long-term value for the products that are created by them, they need to
manufacture products that are high in growth, which needs lots of cash along with products that
have low growth so that it can help in generating cash. The matrix contains of market share and
market growth, which are the two broad dimensions that help in understanding the matrix. The
primary idea behind this concept is to understand if the product can create a larger share in the
market or the rate at which the product is growing in the market, which will benefit the company
(Shanbhag, Dutt and Bagwe 2016).
Segments in the BCG matrix
The products are placed in the matrix within the four categories, which are as follows:
 Stars (high share in the market, high growth)
This category indicates that the products are using heavy amounts of cash and are leaders in the
business within the market. these products also help in generating large amount of cash. The star
products are mainly on balance in the net cash flow statement of the company. the shares of these
products need to be kept by the company so that the rewards are high, if the market shares are
kept for the star products then the reward will be the cash cows (Palia, De Ryck and Mak 2014).
 Cash Cows (high share in the market, lo growth)
These products help in generating more amounts of cash, as they are the profitable products in
the market. These products do not enjoy lot of growth in the market, which is the reason for the

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investment to be made lower in nature. These products help the company to get established in the
market, as the demand of the consumers are high with respect to the product. These products stay
for a lesser period in the market, as the primary function is to establish the company within the
competitive market environment (Tao and Shi 2016).
 Dogs (low share in the market, low growth)
The company needs to minimize or avoid the dog products so that it helps them to stay afloat
within the competitive market environment. The companies need to plan for an alternative route,
which is the rescue plan so that they can survive in the market if the dog products fail in the
market. These products need to help the company by generating large amounts of cash or else the
company must liquidate the products to ensure its survival in the market (Guta 2017).
 Question marks (low share in the market, high growth)
These products have the lowest returns in cash and uses up huge cash in the process of
manufacture. These products significantly have low shares in the market place, as they do not
help in generating large amounts of cash for the company. The shares in the markets of the
products, if not changed in a proper manner will absorb the cash that is allocated for the other
products. The companies need to invest heavily or noting or sell off the products so that it can
help in generation of cash (Aithal 2016).
The strategies in BCG matrix
The BCG matrix helps in understanding the methods, which may lead to mistakes while
developing the strategies, which will help in developing the strategy that will help the company
in all ways such as the growth target that is generic in nature along with the return on capital that

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the company may expect after implementing the strategy. The business products that fall under
Cash Cows will help the company in reaching its target in an easy manner (Gito and Kumar
2014). The management that looks after these products have an easy job and the executives are
praised who are responsible for the success of these products. These products will help in
reinvesting the capital so that the business can mature over a time-period and help the company
to establish itself strongly in the market (Wayubood et al. 2017).
The business products that are known as dogs are struggling constantly to ensure its
survival in the market and require huge investments each of time when they are marketed. These
products constantly try to change the business scenario by attracting large number of consumers
towards it.
The starts and the question marks product receive little funds to ensure its survival in the
market. These products find it difficult to turn themselves in to Cash Cows and the money that is
invested are termed as losses for the company. These products need to receive adequate funds
from the company so that they become Cash Cows at a later stage or the companies need to stop
investing in these products (Guta 2017).
Other benefits and uses
The companies need to understand the ability of the experience curve, which should be
used as an advantage to manufacture and sell products at a competitive price so that they can
enjoy a better leadership in the market (Wang and Ge 2013). When the products become a star, it
is deemed that it will be profitable in the market. This matrix helps the managers in evaluating
the current portfolio with respect to stars, Cash Cows, question marks and dogs. The matrix is
applicable in large companies that seek to produce large number of products. This model also

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acts as base for the management to decide the course of work, which the company might do in
the future (Tao and Shi 2016).
Limitations of the matrix
There are a number of limitations as well while using the BCG matrix, which are as
follows:
 The synergic effects between the products will be neglected largely
 The success of the product does not only depend on the higher shares of the product in
the market
 The growth in the market with respect to the product is not the only attractive factor for
the company
 The definition of the market for the matrix is not clear (Wayubood et al. 2017).

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