BCG matrix is the method or tool for companies to evaluate their product portfolio and business units for developing best possible business strategy. BCG matrix was developed by Boston consulting group to facilitate the companies and corporation for managing their product and business portfolio.
BCG matrix is a four cell grid, each cell has name associated with it. Following are the names of four cells in BCG Matrix.
The purpose of BCG matrix cells tagging to classify the products or business units on basis of relative market share and industry growth rate.
The products or business with high relative market share and low industry growth rate falls into cash cows cell. These business entities generate more cash inflow with less requirements of investment. The Cash cows have high market share but industry growth is slow as compared to stars.
Stars are the business entities with high market share and industry growth. The cash inflows are high but on the other hand it also requires heavy investment to meet the expenses of marketing, distribution, R&D and other business operations.
As named suggest Question marks are the business entities with high growth rate and low market share. It can fall either into Stars and Dogs, company has to make decision to further invest on Question marks or eliminate by selling off to other companies.
Dogs are the business entities with low market share and growth rate. No company wants dogs in their business or product portfolio because they only eat meat in the form of cash and having minimal cash inflows. The best thing company can do to liquidate the dogs to minimize the risk.
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