Boston Consulting Group Products Services Matrix

The Boston Consulting Group (BCG) Product Matrix is a well-known model that has been used for several years. It defines four categories of products/services based on their growth rate and competitive position, as shown in Figure 20.3.

Cash Cows

These are well-established products/services that have a strong market share but limited growth potential. They are stable and profitable. Projects that relate to cash cows are important to the organization because they will want to protect that investment for as long as it maintains that market position.

Dogs

Because these products/services are not competitive and have little or no growth potential, any projects related to them should not be undertaken. The best thing that can happen to the dogs is that the organization phase them out as quickly and painlessly as possible. Don't send good money after bad!

Figure 20.3 BCG Products/Services Matrix.

Stars

These are products/services that have strong market positions and clearly strong growth potential. Projects related to stars are good investment opportunities. Stars are the future cash cows.

The question mark represents the starting point of the model. Products/services that are untested in the market but appear to have strong growth potential are worthy of spending R&D dollars. Projects linked to those efforts are good investment opportunities. The objective is to turn them into stars and then cash cows.

How Are You Going to Allocate Your Resources?

It all depends on the current market position of the enterprise, what the business outlook is, and a variety of other considerations. Except for the dogs, the other three categories will have some level of investment. If the industry is stable, cement manufacturing, for example, more resources might be spent on the cash cows to make sure they maintain their market position, lesser resources on the stars because the enterprise will always want to keep some growth opportunities in the pipeline, and even lesser on the ? because the industry isn't in the research and development mode. In a volatile, high-growth, hightech industry the allocations might be very different. More resources will be spent on the stars and ? and fewer on the cash cows. Cash cows will have a very short useful life, and any investments in them will be risky.

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