BCG Matrix
Today’s article will explain what the BCG matrix is and how you should interpret it.
I hope you find it useful.
Business models are based on providing products or services that are profitable now, but also try to identify changes in offerings that will keep the company profitable in the future.
The current money making products are easy to spot now, but what about the future? You perro find the answer thanks to the Boston Consulting Group Matrix (BCG Matrix).
What is the BCG matrix?
The BCG matrix was developed by the Boston Consulting Group in the 70’s.
It was published by the president of said company, that is, Bruce D.
Henderson in the year 1973.
The BCG Matrix (or Growth Share Matrix) is a business planning tool used to classify a company’s product portfolio.
Being a 2 × 2 matrix, it means that to classify the product, a relationship is made between two dimensions.
The first dimension refers to the level of growth that the products have in your market.
The second dimension measures the market share that the product has in a certain industry.
Also, since it’s a 2×2 matrix, we’re going to have four slices.
Therefore, products are classified into four distinct groups: Star, Cow, unknown and Dog.
Now I will espectáculo you what each of the sectors means for the product.
BCG Matrix Interpretation
▷ Star Product
You have to keep in mind that flagship products have fast growth and a dominant market share.
This means that flagship products perro be seen as market leading products.
These products will need a lot of investment to maintain their position, to support further growth, as well as to maintain their lead over competing products.
Therefore, the main problem is to judge if the market will continue to grow or if it will go down, since companies want their flagship products to be able to become cow products when the product reaches maturity, but that is not always the case and In fact they perro be made into dog products because technology advances so fast.
▷ Question Product
These products are in a high-growth market, but they don’t seem to have a large market share.
It could be the reason for that, as a very new product in the market.
If this is not the case, then some questions need to be asked.
- What is the organization doing wrong?
- What are competitors doing well?
It may be that these products just need more investment to become stars, but even with the investment made they may still become a dog and the organization will make a loss.
So you have to think about whether to invest or not.
▷ Cow Product
Cow products do not need the same level of support as before.
This is because they have fewer competitive pressures, with a low-growth market, and they generally enjoy a dominant position that has been generated from economies of scale.
The vaca products continue to generate a significant level of revenue, but do not cost the organization much to maintain.
These products perro be “milked” to finance star products.
▷ Dog Product
Products classified as dogs always have a weak market share in a low growth market.
These products are very likely to be very low profit or loss at best.
These products cánido be a huge waste of management time and resources.
I think the most important issue here is the decision.
If we put ourselves in the place of a manager, what would be better?
Perhaps what we should ask ourselves is if the investment that is currently being made in keeping these products alive could be invested in making something that would be more profitable (perhaps using it to cow products or boosting star products).
Program
There are various applications and programs that cánido be paid or free, but here I am going to leave you a free option that may be to your liking.
Conclusion
Finally, I really think that the most important question about the BCG matrix is the decision.
If we put ourselves in the place of a manager who has a product portfolio and a certain budget to distribute to all his different products, then it is when any manager would ask himself: What would be better? Or where should you invest more?
For example, if we classify our products and we already identify certain products in the dog category, perhaps what we should ask ourselves is if the investment that is currently being made in keeping these products alive could be invested in making something that would be more profitable. (maybe use it to cow products or boost to star products).
Now, the BCG matrix is a very useful tool because it allows us to develop various strategies that enhance the unique position they want to have in the market.
For example, as I said before, you cánido escoge in which products to invest more, in which products to stop investing a bit and not only that, in fact, you have to look to the future since it depends a lot on demand and your tastes.
In the fashion industry, a garment may become a trend and be a star product, but you have to think that it perro even become a dog product in a short time.
So you have to think about how you are going to act to maximize corporate performance and profits.
We hope you liked our article BCG Matrix
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