BCG Growth-Share Matrix

Overview

When to Use

• User managing multiple products or business units and needs to prioritize
• User asks "which products should we invest in vs cut?"
• User needs a portfolio-level view of their business
• User mentions "cash cow", "star product", or "portfolio strategy"

• For single-product strategy → use SWOT or Blue Ocean
• For industry-level analysis → use Porter's Five Forces
• When detailed financial modeling is needed → use DCF or financial ratios

Framework

IRON LAW: Relative Market Share, Not Absolute

The X-axis is RELATIVE market share = your share / largest competitor's share.
A company with 20% share in a market where the leader has 40% = 0.5x (Low).
A company with 20% share where the next largest has 10% = 2.0x (High).

NEVER use absolute market share. A 30% share means nothing without knowing
the leader's share.

IRON LAW: Plot THEN Strategize

Place ALL products/units on the matrix BEFORE deciding strategy.
Portfolio balance matters — a company with only Stars has a cash crisis
(Stars consume cash). A company with only Cash Cows has no growth pipeline.

Step 1: Define the Portfolio Units

• A distinct unit with its own market and competitors
• Measurable in terms of revenue, market share, and market growth

Step 2: Gather Data for Each Unit

• Market growth rate: Annual growth rate of the total market (not your revenue growth). Typically, >10% = High growth.
• Relative market share: Your market share ÷ largest competitor's market share. >1.0x = High.

Step 3: Plot on the Matrix

Step 4: Determine Strategy per Quadrant

Step 5: Assess Portfolio Balance

• Healthy: Mix of Cash Cows (funding) + Stars (growth) + 1-2 Question Marks (pipeline)
• Unhealthy: All Cash Cows (no growth), all Stars (cash drain), all Dogs (declining)

Output Format

# BCG Matrix Analysis: {Company/Portfolio}

## Portfolio Units

| Unit | Revenue | Market Growth | Rel. Market Share | Quadrant |
|------|---------|--------------|-------------------|----------|
| {Product A} | {$X} | {X%} | {X.Xx} | Star/Cash Cow/QM/Dog |

## BCG Matrix Placement

| | High Share (>1.0x) | Low Share (<1.0x) |
|---|---|---|
| **High Growth (>10%)** | ⭐ {list Stars} | ❓ {list Question Marks} |
| **Low Growth (<10%)** | 🐄 {list Cash Cows} | 🐕 {list Dogs} |

## Strategic Recommendations

### Stars — Invest
- {Product}: {specific investment recommendation}

### Cash Cows — Harvest
- {Product}: {how to maximize cash extraction}

### Question Marks — Decide
- {Product}: Invest / Divest — {rationale}

### Dogs — Divest/Reposition
- {Product}: {recommendation}

## Portfolio Health Assessment
{Overall balance evaluation and rebalancing recommendations}

Examples

Correct Application

Incorrect Application

• Used absolute market share (25%) instead of relative (25% / leader's 30% = 0.83x) → Would misclassify as High Share when it's actually Low. Violates Iron Law.
• Decided "invest in everything" without plotting first → No portfolio trade-off analysis. Violates Iron Law: plot then strategize.

Gotchas

• Market growth ≠ your revenue growth: A product growing 20% in a market growing 25% is losing share. Use market growth rate, not company revenue growth.
• Relative share threshold: The 1.0x cutoff is a guideline. In fragmented markets with no clear leader, adjust the threshold. Document your reasoning.
• BCG is a snapshot: Markets evolve. Stars become Cash Cows, Question Marks become Dogs. Reassess annually.
• BCG ignores synergies: A "Dog" that provides key components to a "Star" may be worth keeping. Factor in cross-unit dependencies.
• Not all Question Marks can be funded: The hardest decision. Use additional criteria (market fit, team capability, strategic importance) to choose which to invest in.

References

• For GE-McKinsey Matrix as an alternative (multi-factor version), see

  references/ge-mckinsey.md

• For comparison with other strategy frameworks, see

  references/framework-comparison.md