How do you deal with question marks and dogs in the BCG matrix?

1 What is the BCG matrix?

The BCG matrix, also known as the growth-share matrix, was developed by the Boston Consulting Group in the 1970s. This simple framework divides business units into four categories based on two dimensions: relative market share and market growth rate. Stars are high in market share and growth rate, and are the most profitable and competitive business units that generate a lot of cash and require a lot of investment to maintain their position. Cash cows have high market share and low growth rate, and are stable and mature business units that generate a lot of cash and require little investment to sustain their performance. Question marks have low market share and high growth rate, and are risky and uncertain business units that have the potential to become stars or dogs depending on their market attractiveness and competitive advantage. Dogs have low market share and low growth rate, and are weak and unprofitable business units that generate little cash and require little investment to maintain their status. They may be candidates for divestment or restructuring.

2 How to use the BCG matrix?

To use the BCG matrix, you need to identify your business units, calculate their relative market share and market growth rate, plot them on the matrix, and analyze their strategic implications. You can define your business units by product, service, brand, division, or any other meaningful way that reflects your strategic goals and market segments. You can use data from your own financial reports, industry reports, market research, or other sources to calculate relative market share and market growth rate. You can use a simple grid or a graphical tool to visualize your business units on the matrix, and you can also use different sizes or colors to indicate other factors such as profitability, market size, or customer loyalty. The matrix can be used to assess the strengths and weaknesses of your business units, their contribution to your overall performance, and their future prospects. It can also guide your resource allocation, investment decisions, and portfolio management.

3 How to deal with question marks and dogs?

Question marks and dogs are the most challenging types of business units in the BCG matrix, requiring careful evaluation and strategic action to maximize their value and minimize their risks. When dealing with question marks, you need to decide whether to invest in them or not, using criteria such as market attractiveness, competitive advantage, strategic fit, and financial feasibility. If you choose to invest, you should pursue a growth strategy to increase their market share and turn them into stars. If not, you should harvest them for cash or divest them before they become dogs. For dogs, you need to decide whether to keep them or not, using criteria such as strategic importance, synergies, social responsibility, and exit barriers. If you choose to keep them, you should optimize them for efficiency and profitability or use them for other purposes such as cross-selling, innovation, or learning. If not, you should divest them or liquidate them as soon as possible. The BCG matrix is a useful tool for competitive analysis and strategic planning, but it is important to use it with caution and judgment, taking into account the limitations and assumptions of the model, the dynamics and complexity of the market, and the specific context and objectives of your business. By doing so, you can prioritize your business units and optimize your portfolio.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?