A company is called upon at one time or another to make investments in an activity in order to ensure a good evolution. These investments need to be closely monitored in order to know what is profitable or not. Which isn’t always easy. To facilitate this monitoring and to allow the company to make the right choices, the BCG matrix was created in 1968 and helps in decision-making regarding investment choices. What is a BCG matrix? What is it for ? What are the benefits of using it? How to make one for your business?
What is a BCG matrix?
The BCG matrix, whose name comes from that of Boston Consulting Group, which created it, is a marketing tool for analyzing products according to their evolution and their value on the market. It has two components which are growth and market share. The products on which the company invests are divided into four groups: the stars, the cash cows, the dilemmas and the dead weights.
Why make a BCG matrix of your company?
The BCG matrix allows a company to redefine its marketing strategy, but also to review its investments. Thanks to the BCG matrix, the company knows which of its activities deserves the most attention, which one to invest a lot in and which one to abandon altogether. The BCG matrix allows adequate monitoring of a company’s activities while facilitating decision-making.
What is a featured product (Star) ?
Featured products are booming products. Their market share is large as well as their growth. These are products that are not yet well known to the public and require a lot of marketing effort. They require a lot of background to make themselves known, but also bring in a lot. These are the products that become cash cows after a few years if the activity is maintained.
What is a cash cow?
A cash cow product is a product already known to everyone. It no longer requires any particular marketing strategy. It has stable growth and its market share is large. At this stage, the products in this category are among the most profitable activities for the company. These are activities for which the investment has become minimal while the profit is great. Their benefits nourish the structure.
What is a dilemma product (question mark)?
The dilemma product is a low growth business. Indeed, these are activities for which the market is significant, but whose development within this market is weak. These activities require significant marketing and follow-up. They can at any time become star activities or deadweight activities. Everything will depend on the impact of the marketing strategy implemented on the market.
What is a deadweight product (Dog) ?
These are loss-making activities within the BCG matrix. They have no impact on the growth of society and even their market is weak. These are activities that the company can decide to abandon or for which it can on the contrary decide to invest a maximum of money. Note that if the marketing around it is not good, these same activities could lead to the bankruptcy of the company.
How to create the BCG matrix of your company?
To create your own BCG matrix, you must start by analyzing your market. This analysis will aim to know the market share that the company has. Then it will be necessary to determine within this market what is the growth of each activity. Market growth will also need to be assessed. A comparison will then be made between the growth of the company’s market and that of its competitors. All this must be done over a long period of two or three years. Once all this is done, we create the BCG matrix with the ordinate of the market growth and the abscissa of the market share that the company has.
What to do for its cash cow products?
These products generate enough money while requiring little investment. It will therefore be wise to use the money from the cash cows to ensure the growth of the stars who will later become cash cows. Also, part of the income from these cash cows can be used to increase the market share of deadweight and to put in place a good marketing strategy.
The growth or decline of a business largely depends on these investments. The BCG matrix, also called the BCG matrix, is a tool suitable for monitoring the activities of a company. The BCG Matrix is easy to make with an example available on several marketing sites. The cash cow products in the BCG matrix are the most stable and are the ones that feed all the others. The BCG matrix saves time while making adequate decisions. It should be remembered that all activity must be monitored.
The BCG matrix is a simple and easy to understand tool. It provides managers with a relevant basis for reflection to guide their strategic choices. It can be associated with other tools that will complement the elements of reflection it provides.