BOSTON

CONSULTING
MATRIX
(BCG)
BCG MATRIX
The Boston Consulting Group (BCG) matrix is a visual marketing management tool used
to analyse a firm’s product portfolio. For example, Apple’s product portfolio (which gives it a
range of revenue streams) include: the iPhone, iPad, iPod, iTunes, Apple Watch, MacBook
laptops and computer accessories. Some products (such as the iPhone) earn Apple a huge
amount of sales revenue, whereas other products in its portfolio (such as iPods) earn less
revenue for the company. The term BCG Matrix is named after Boston Consulting Group, the
management consultancy group that developed the marketing management tool.
Did you know?
PepsiCo’s product portfolio includes: Lay’s, Doritos, Quavers, Cheetos, Mountain Dew,
Aquafina, 7-Up, Lipton, Tropicana, Gatorade, Taco Bell, KFC, and Pizza Hut.

The Volkswagen group (Europe’s largest car manufacturer) owns Audi, Bentley, Bugatti,

Ducati, Lamborghini, and Porsche.

Proctor & Gamble’s billion-dollar products (those that earn P&G more than $1bn in sales a
year) include: Crest (toothpaste), Duracell (batteries), Gillette (shaving products), Head &
Shoulders (shampoo products), Oral-B (hygiene products), Pampers (diapers), Tide (cleaning
products) and Pringles (potato chips).
Benefits of a balanced product
portfolio
•Having a broad product portfolio can a help business to increase its brand awareness.

•It also reduces the risks and exposure associated with having just a single product, e.g.
seasonal fluctuations in demand.
•It increases the firm’s revenue streams as a variety of products will appeal to a wider
customer base.
The BCG matrix is used to place a firm’s products according to its
market share and the market growth. It is a useful marketing tool for
managing a varied range of products. There are four product
categories in the BCG matrix:
Question marks (problem children)
•Products with low market share but in a high growth market.

•The product is at the introduction (launch) stage in the product life cycle.

•These products use up the firm’s finances (negative cash flow) but are yet to be profitable.

•Marketers attempt to convert question marks into stars, although this needs investment.
Stars
•Successful products with high market share in industries with high market growth.

•Stars are at the growth stage in their product life cycle.

•Marketers aim to invest in these products in order to turn them into cash cows.
Cash cows
•Products with high market share, in mature markets with low market growth.

•Cash cows are the most profitable in a firm’s product portfolio as they are at the maturity
stage in their PLC.
•The products are well established in the market so are the main cash earners for the
business.
Dogs
•Dogs are products with low market share in markets with low or declining growth.

•These products are at the decline phase of the PLC.

•Firms need to decide whether to spend money on extending the life of such products, or to
divest in order to prevent further losses since they drain cash from the business.
 Product portfolio strategy
•For question marks, a building strategy is used in order to turn question
marks into stars.
•For stars, the firm uses a holding strategy – some investment is needed
to maintain high market share and to sustain consumer demand for the
product.
•For cash cows, a harvesting strategy is used to milk the cash from its
best-selling products. The funds can be used to finance the investments
in stars and question marks.
•For dogs, a divesting strategy is used, whereby poor performing dogs
are phased out of the market as they reach the last stage in their product
life cycle.
Good product portfolio management requires a balance number of stars and cash cows.
These products generate cash for the business and enable it to create new products
(question marks) to meet ever-changing consumer needs and wants. Having too many dogs
and question marks can create liquidity problems for the organization.

Note: although market growth and market share might be high, this does not necessarily
mean the firm’s profit is high. For example, high sales volume may be due to extremely low
prices (and hence low profit margins). In addition, costs of production need to be considered
to calculate profit.
Did you know?

The first products on McDonald’s menu were hotdogs, when the McDonald brothers (Dick
and Mac McDonald) started their hotdog stand in 1937. McDonald’s didn’t introduce burgers
and milkshakes until 1948.
Read this article about product portfolio strategies of
Bentley, Porsche and BMW that go beyond cars

https://www.scmp.com/magazines/style/watches/article/2140843/best-non-car-stuff-buy-bentley-porsc
he-and-bmw

TASK
Explain 2 examples of product portfolio strategies (different from those explained in the article above).