The growth-share matrix
The BCG growth-share matrix is a tool developed by the Boston Consulting Group (BCG). It aims to help organizations determine the relative market position for different products or features and decide where to invest resources.
The matrix categorizes each product line as a "star," "cash cow," "pet," or "question mark," depending on its market share and growth rate.
Star
A product line or business unit with a high market share in a rapidly growing market. Stars require significant investment to maintain their position but have the potential to become "cash cows" when the market growth slows down.
Examples: The high-end modes of the Apple iPhone are excellent examples of products with a high market share that is still rapidly growing. Disney's streaming service is another excellent example.
Cash cow
A product line or business unit with a high market share in a slow-growing market. Cash cows generate a lot of cash but require little investment. They can fund the growth of other business units or product lines.
Examples: Coca-Cola is the best example of a brand with a high market share in a slow-growing market. Many well-known household CPG brands, like Clorox bleach or Bounty paper towels, would also fall into this category.
Pet
A product line or business unit with a low market share in a slow-growing market. Pets typically have low profitability and may require divestment if they do not contribute to the organization's overall success.
Examples: Outdated hardware like Apple's iPod is a good example of a product with a low market share in a slow-growing market, and Apple retired the product line in 2022. Seasonal clothing that is no longer popular and has a low market share is another good example.
Question mark
A product line or business unit with a low market share in a rapidly growing market. Question marks require significant investment in order to grow market share but have the potential to become "stars."
Examples: Any legacy car company's electric vehicle line with a low market share in a rapidly growing market would fall into this category. Another good example is a food company's line of plant-based meat alternatives with a low market share in a rapidly growing market.
How to use this framework
→ If a product line or business unit is a star, you may want to invest more resources to maintain or increase its market share.
What's important to recognize with a star is that it requires significant investment to maintain the pace of product development and support the sales and marketing efforts. The most common mistake management make is transitioning to a "cash cow" too early and allowing growth to slow while the market for the product is still competitive.
→ If it is a cash cow, you want to generate as much cash as possible while maintaining the unit or line's market share.
Milking cash cows is what AOL did with their internet dial-up business, or Apple did with their iPod business. You also see examples of this in startups that pivot from a legacy product into a new one, milking the old product and using that cash flow to fund the new one.
→ If it is a pet, you want to consider divesting the unit or line.
These businesses are typically at the end of their life cycle, and divesting makes sense when the operational costs exceed any profits that the product or business unit can bring.
→ If it is a question mark, you want to consider investing in the unit or line to increase its market share and turn it into a star.
Most venture-backed startups start in the question mark box and aspire to move into the star box, which is why they require subsequent funding rounds to keep up with business growth.
Download The growth-share matrix Google Slide template here.
