Boston Consulting Group (BCG) Matrix (DP IB Business Management)

Revision Note

Flashcards

Boston Matrix & the Product Portfolio

  • The Boston Consulting Group (BCG) Matrix is a tool used by businesses to analyse their product portfolio and make strategic decisions about each product

  • The matrix classifies products into four categories based on their market share and the market growth rate

    • Cash Cow

    • Problem Child/Question Mark

    • Star

    • Dog

Diagram: the Boston matrix

The classification of products in the Boston Matrix according to their market share and the growth rate in the market as a whole
The classification of products in the Boston Matrix according to their market share and the growth rate in the market as a whole 
  • By categorising products into these categories, businesses can allocate resources more effectively, optimise their cash flow and develop marketing strategies that align with the product's potential

The Boston Matrix, Cash Flow and Marketing Strategy

Product Type

Explanation

Implications

Cash Cow

  • Cash cows are products with a high market share in a mature market (the entire market is no longer growing)

  • They generate significant positive cash flow but have low growth potential

  • The business invests minimal resources in cash cows as they are seen as stable sources of income

  • Marketing efforts focus on maintaining their market share and profitability

  • Cash cows are valuable assets and can be used to fund the development of new products

Problem Child/Question Mark

  • Problem child or question mark products have a low market share in a high-growth market

  • These products have the potential to become stars if the company invests in their development

  • There is often a negative cash flow as businesses usually invest in problem child products to increase their market share and turn them into stars

  • If the investment does not result in growing the business may discontinue the product

  • Marketing efforts focus on increasing their market share and brand recognition

Star

  • Star products have a high market share in a high-growth market

  • The company typically invests in stars to maintain or increase their market share

  • They generate significant positive cash flow and have the potential for continued growth

  • Marketing efforts focus on building brand recognition, increasing market share, and maintaining profitability

  • Stars are valuable assets and the business should focus on maximising their potential

Dog

  • Dog products have a low market share in a low-growth market

  • They generate little revenue for the company and have no growth potential

  • Businesses often move away (divest) from these to focus on more profitable products

  • Marketing efforts for dog products are minimal or zero

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