2. Genesis of BCG
• The origin of the Boston Matrix lies with the
Boston Consulting Group in the early 1970s.
.
3. • The Boston Consulting Group (BCG) Matrix is a
simple tool to assess a company’s position in
terms of its product range. It helps a company
think about its products and services and
make decisions about which it should keep,
which it should let go and which it should
invest in further.
4. Question mark (problem child stage?)
• Investment—heavy initial capacity
expenditures and high R&D costs
• Earnings—negative to low
• Cash-flow—negative (net cash user)
• Strategy Implications
– If possible to dominate segment, go after share. If
not, redefine the business or withdraw
5. Star stage
• Investment—continue to invest for capacity
expansion
• Earnings—Low to high earnings
• Cash-flow—Negative (net cash user)
• Strategy Implications
– Continue to increase market share—even at the
expense of short-term earnings
6. Cow stage
• Investment—Capacity maintenance
• Earnings—High
• Cash-flow—Positive (net cash contributor)
• Strategy Implications
– Maintain market share and cost leadership until
further investment becomes marginal
7. Dog stage
• Investment
– Gradually reduce capacity
• Earnings—High to low
• Cash-flow
– Positive (net cash contributor) if deliberately
reducing capacity
• Strategy Implications
– Plan an orderly withdrawal to maximize cash flow
8. Three steps to success
• Continuously generate cash cows and use the
cash throw-up by the cash cows to invest in
the question marks that are not self-sustaining
• Stars need a lot of reinvestments and as the
market matures, stars will degenerate into
cash cows and the process will be repeated.
• As for dogs, segment the markets and nurse
the dogs to health or manage for cash
9.
10. Three paths to failure
• Over invest in cash cows and under invest in
question marks
– Trade further opportunities for present cash flow
• Under invest in the stars
– Allow competitors to gain share in a high growth
market
• Over milked the cash cows
