Understanding the BCG Growth Share Matrix and How to Use It
For example, network effects, customer retention, and recurring revenue models often hold more importance than traditional market dominance. For digital sectors, growth cycles are shorter, and companies must continuously adapt to remain competitive. Rapid technological shifts and shorter product lifecycles often complicate long-term investment strategies. It is one of the most accepted methods of Portfolio Analysis and segregates a firm’s product and services into a 2/2 Matrix or, into four quadrants. Each quadrant is labeled as low or, high according to their performance which is again further based on the Relative what does question mark symbolize in bcg matrix Market Share and Growth Rate Of The Market. The company can either discontinue the product or invest to make improvements.
Advantages
- In the Coca-Cola BCG matrix example, Diet Coke and Minute Maid are Question Marks, as these products attract a modest audience, but still have room to grow.
- Therefore, the GE matrix was developed to overcome the limitations of the BCG matrix.
- Routine reassessment is essential, as market dynamics and product positioning can change over time.
- When a product is in the underdog position, it has a small market share in a mature market.
- Whatsapp’s growth rate has been more or less maximised, with few competitors.
- Question marks or problem children appear in the upper right portion of the grid.
The BCG matrix doesn’t acknowledge the synergies between different products. For example, it only measures products individually rather than as units, which can make all the difference. The BCG matrix is a simple framework that all companies can use to evaluate their products. Anyone can look at the matrix and grasp which of the business’s products are performing the best. For example, what is the market share for different types of cell phones in the U.S.?
Pets or Dogs are the products that have a low market share and growth rate. It is advised to discontinue investments in dogs to use the cash in profitable products. Cash Cows are the leaders in the marketplace and generate more cash than they consume.
Highlights opportunities
Amul brand is a prominent and popular name in the dairy industry in India. It produces milk, butter, and other dairy-related products and successfully caters to the Indian population. The growth rate of an industry can be found from the industry reports released every year and are put up on official websites. It can also be calculated by considering the average revenue growth of the leading industrial enterprises.
Does not provide a complete picture of success/failure
One of the noteworthy examples in this regard is Amul Chocolates and Amul Pizza. The competitors make it tough to amplify the market shares to a notable degree which can turn this product to become an outstanding source of sustainable revenues. However, if the sales figures do not proceed towards betterment, a probable measure would be to take the path of divestment of the above-mentioned brands.
# 3 – Cash Cows – Low Growth and High Market Share
In some cases, we earn commissions when sales are made through our referrals. These financial relationships support our content but do not dictate our recommendations. Our editorial team independently evaluates products based on thousands of hours of research. Apple is a well-known example of a company that effectively utilizes the BCG Matrix to manage its product portfolio and align it with the Apple business model. Vincent van Vliet is co-founder and responsible for the content and release management.
The BCG Matrix is crucial for Apple in making strategic resource allocation decisions that maintain growth and financial stability. By using this analysis, Apple can determine where to invest, innovate, or divest, ensuring it remains competitive and successful in the long term. The market share of the product grows like a ‘rising star’ in the growth market. With targeted investments such as innovations and adjustments to the product, this lead in the market is maintained. Matrices like the BCG Matrix were quite fashionable for a while when companies tended to hold a lot of business lines, acquire more and divest rarely. The 1980s brought a lot more corporate discipline through the disruptive influences of raids, hostile takeovers, and leveraged buyouts (LBOs).
