Introduction to the BCG matrix
The BCG matrix was developed by the Boston Consulting Group in 1968. It is a portfolio matrix tool and is designed for larger companies to map, compare and analyze their existing business divisions (strategic business units) or sets of products.
The Boston Consulting Group matrix is also known as the growth/share matrix or simply the BCG matrix and even the BCG model. Also please refer to the article on the overview of the BCG matrix.
It is a common marketing model included in numerous marketing textbooks, particularly in the chapter on marketing strategy. It is also often included in marketing strategy textbooks, either in the internal analysis chapter or a separate chapter on portfolio matrices.
The Harvard Business Review has listed the BCG matrix as one of the business models that changed the shape of strategy. (Please see the HBR article for more information.)
Benefits of the BCG matrix
The key benefits of the BCG matrix are:
- It is very simple to use and explain, as there are only two dimensions and four quadrants
- It is a reputable and long-standing strategic model that has proved to be robust over time and significant changes in the competitive environment
- Usually the measurements required – market growth and relative market share – are available to the company, along with competitive measures, making it relatively easy to execute and prepare
- Clear guidance is provided for each quadrant in terms of the approach to investment and support of business units (or brands or products) – perhaps with the exception of the question mark quadrant (please see discussion of the question mark quadrant)
- It is an important model for allocating resources for firms pursuing market share goals and seeking experience curve benefits
- The firm has a basis for allocating resources across its business units, based upon competitive position and market opportunity – making for a more strategic based decision
- Although the matrix is developed based upon historical/current position, the four quadrants of the BCG matrix provide some strategic guidance for the future
- The matrix is more beneficial for large-scale manufacturing operations where experience curve benefits can be realized – that is, where they is a strong correlation between market share profitability
- For students, it provides a good understanding of the concept of aligning competitive strengths with market opportunities in the development of a suitable strategy for the organization.
The limitations of the BCG matrix