The Business Book

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can use this information to make
sure it has a mix of products that
will satisfy its short- and long-term
needs, and to think about the priority
and resources they should allocate
to each product. The matrix assesses
products on two levels: first, the
potential growth in the market for
that product; second, the market
share held by each product.

Using the Boston matrix
By using the matrix, managers can
see where their products fall among
four categories: dogs, question
marks, stars, and cows. “Dogs” are
products that have low growth
prospects and a low market share.
These products may be making a
loss, barely breaking even, or
possibly generating a tiny amount
of profit. Because they are in a
slow-growing market, there is little
chance that performance will
improve under current conditions.
Products that fall into this cell of
the matrix are candidates for

culling from the product portfolio.

However, before the dog is sold off

or disposed of, management must

consider if it is worth keeping for

strategic reasons. For example, if it

is blocking a competitor product or

the market for that industry is likely

to pick up in the future, it might be

worth retaining. Or it may play an

important role in complementing

another product in the portfolio

and providing customers with a

stepping stone to that product.

Like the dog, the “question

mark” product also has a low share

of the market, but it is in a high-

growth industry. Products in this

box can create a dilemma for the

company. If it is new, does the

product need more time to prove

itself, and more investment in

manufacturing or marketing? Or

does it need more market share,

which could be arranged by buying

up competitors? Perhaps it needs

repositioning in the market. Or

should it be dropped entirely?

PRODUCT PORTFOLIO

Star

products are

high-selling items

in a market that

is expanding.

Cow

products have a

strong presence

in the market and

generate a solid

revenue.

Question mark

products,

sometimes also

referred to as

“Infants,” have

the potential for

growth.

Dog

products have low

market share and

growth prospects;

they may be ripe

for divestment.

High

MARKET GROWTH

MARKET SHARE

High

Low

Low

“Stars” are products that have a

large market share in a growing

market. These require investment

to maintain their position and help

them grow into the dominant

product in the market. They have

the potential to be a future cow.

“Cows“ are products that were

once stars. They continue to hold a

large market share, but they are

mature products in an established

market that has little potential for

growth. They no longer need much

investment, because they have

reached their growth potential, and

as market leaders they sell in large

numbers of units, giving them the

advantage of economies of scale.

This means they generate cash

while costing very little.

The matrix in practice

Nestlé is often cited by management

theorists as a textbook example of

how a company might arrange its

product portfolio according to the

BCG matrix. The world’s largest

food company, with some 8,000

brands, Nestlé has developed a

strategy of building its long-term

cows and keeping them as fresh as

possible, devoting capital to

product areas that have a prospect

of high returns, and shedding

The BCG matrix

can be used to

categorize products

in terms of growth

and market share,

so companies can

check that they have

a well-balanced

product portfolio.

Products with a

high market share

are plotted into cells

on the left-hand

column, and those

with low market

share on the right.

The top row is home

to products with high

potential for growth,

while those in the

bottom row are in

declining markets.

High-growth products require

cash inputs to grow.

Low-growth products should

generate excess cash. Both are

needed simultaneously.

Bruce Henderson