Mark 2

Question 1

Present the Boston Consulting Group’s Growth-Share matrix and describe its sections

Answer 1

The Boston Consulting Group’s (BCG) growth-share matrix is a 2x2 matrix, the axis of which is based on market growth and relative market share.

Market growth rate forms the vertical axis and indicates the annual growth rate of the market. Relative market share refers to the market share of each product relative to its largest competitor. This acts as a proxy for competitive strength.

1. Star product: Market leaders with past success and prospects for further growth. Resources can be invested in maintaining or increasing the leadership position while repelling rivals. These products are likely to become cash cows during their maturity.
2. Problem Child: Sometimes referred to as Question marks, these products are a cash drain due to their low profitability and requirement of investment. Management will have to decide whether to remove investment or continue in the hope the product evolves into a Star product.
3. Cash cows: Has low investment but high profitability, allowing it to hold sales and market share with good management and investment. Money generated can be used to create new Stars or upgrade Problem childs.
4. Dog Product: Products in low growth markets that failed to achieve market dominance.

Question 2

What are the weaknesses of using the Boston Consulting Group’s Growth-Share matrix

Answer 2

1. The matrix is based on cash flow - Profitability may be a better measure.
2. As the matrix depends on market share, it can lead companies into an unhealthy preoccupation with market share gain.
3. Ignores products with interdependencies that rely on each other. Such as using a dog product that complements a star or cash cow.
4. Treating market growth as a proxy for market attractiveness and market share as an indicator for competitive strength oversimplifies matters.