Stars
High growth, high share. Invest to keep the lead.
- Cash
- May or may not fund itself
- Later
- Becomes the cash cow if it keeps the lead
The BCG matrix, the growth share matrix, worked
The BCG matrix, also called the growth share matrix, sorts a company's businesses by market growth and relative market share into four boxes. Stars (high growth, high share) get investment. Cash cows (low growth, high share) fund the rest. Question marks (high growth, low share) get backed or dropped. Dogs, which BCG calls pets, get fixed, sold or closed. BCG founder Bruce Henderson popularized it in 1970. Soreno, an AI voice interview practice app for consulting, investment banking and other finance candidates, runs a free growth strategy case with no sign-up, where you decide where a company should invest, and full mock cases with scored feedback.
Updated
- The axes
- Relative share across, market growth up
- Relative share is your share divided by the largest rival's
- Origin
- BCG, 1970
- From Bruce Henderson's essay The Product Portfolio
- Worked case
- 4 businesses, 1 budget
- Invented by us, every number shown
- Free practice
- No sign-up
- A full growth strategy case with a timer
What is the BCG matrix?
BCG describes the growth share matrix as a portfolio management framework that helps companies decide how to prioritize their different businesses. It plots two things: relative market share, a stand-in for how competitive the business is, and market growth, a stand-in for how attractive the market is. BCG says the logic was that market leadership results in lasting superior returns. Each business lands in one of four quadrants, and each quadrant comes with its own instruction.
Question marks
High growth, low share. Back them or drop them.
- Cash
- Needs far more than it makes
- Test
- Can it become the leader?
Cash cows
Low growth, high share. Milk them for cash.
- Cash
- More than it needs to hold share
- Use
- Funds the stars and question marks
Dogs (BCG: pets)
Low growth, low share. Fix, sell or close.
- Cash
- Little or none after reinvestment
- Check
- What it shares with other units
Worked example: Northfield Foods (ours)5 steps
Northfield Foods, an invented food company, has four businesses and one pot of cash. Which should it invest in, and which should it sell? This case and every number in it are invented by Soreno for practice.
Set the cutoffs
10% growth, relative share of 1
Our cutoffs: a market growing 10% a year or more counts as high growth, and a relative share of 1 or more (you are at least level with the largest rival) counts as high share. Relative share is your share divided by the largest rival's. Agree the cutoffs with the interviewer before you place anything.
Place each business
One of each
Frozen meals: $1.2 billion of revenue, market growing 2% a year, 30% share against the largest rival's 15%, so a relative share of 2. Coffee pods: $400 million of revenue, market growing 12% a year, 25% share against the largest rival's 20%, so a relative share of 1.25. Plant-based snacks: $150 million of revenue, market growing 18% a year, 6% share against the largest rival's 20%, so a relative share of 0.3. Canned soup: $200 million of revenue, market shrinking 1% a year, 8% share against the largest rival's 32%, so a relative share of 0.25. That makes frozen meals the cash cow, coffee pods the star, plant-based snacks the question mark and canned soup the dog.
Follow the cash
$150 million in, $60 million needed
Frozen meals throws off $150 million a year. Coffee pods needs $20 million and snacks needs $40 million to keep growing, $60 million in all. So the cow covers the growth businesses about 2.5 times over, with $90 million to spare. Frozen meals is 62% of revenue, so the whole plan leans on it.
Decide each one
Fund, test, exit
Fund coffee pods first: it already leads a growing market. Snacks has a 6% share against a leader at 20%, so it needs more than 3 times its share to lead. Ask whether an acquisition or a new channel could get it there, and if not, stop funding it. Canned soup still makes $5 million a year, so sell it rather than close it.
Recommend
Pods first, snacks on a test, soup for sale
Put $20 million into coffee pods to hold the lead, give snacks $40 million for one year against a share target, and start a sale of canned soup. Keep frozen meals lean, since it funds everything else. The main risk: if frozen meals starts losing share, the plan has no money behind it.
Where the matrix came fromBCG's own account
From BCG's history page, Henderson's 1970 essay and BCG's 2014 revisit, all on bcg.com.
The logic
Share makes cash, growth eats it
Henderson's essay sets out the rules behind the grid. Margins and cash rise with market share, which he puts down to the experience curve. Growth needs cash to pay for new assets. So a leader in a slow market throws off cash, and a small player in a fast one burns it.
Who
Sketched by Alan Zakon, popularized by Bruce Henderson
BCG says Alan Zakon, later the firm's CEO, first sketched the matrix and refined it with colleagues, and that founder Bruce Henderson popularized it in his 1970 essay The Product Portfolio.
The idea
A portfolio balanced by cash
Henderson wrote that a company should have a portfolio of products with different growth rates and different market shares, because high growth products need cash and low growth products should generate it.
The names
Pets, not dogs
Henderson's essay calls low share, low growth products pets, and BCG's history page says pets are often represented by a dog. Most guides call them dogs today.
Reach
About half of the Fortune 500
BCG says that at the height of its success, in the late 1970s and early 1980s, the matrix or approaches based on it were used by about half of all Fortune 500 companies, according to estimates.
What BCG itself says has changed2014 revisit
In 2014, BCG's Strategy Institute looked again at the matrix in its Classics Revisited series. Its answer: still useful, but applied faster, with more experiments and a better measure of competitiveness than share.
Speed
Businesses move between quadrants faster
BCG found that companies moved through the quadrants faster in 75% of industries, and that in those industries the average time spent in a quadrant halved, from four years in 1992 to less than two years in 2012.
Share
Share predicts less than it did
BCG writes that market share is no longer a direct predictor of sustained performance, and that the share of total profits captured by cash cows in 2012 was 25% lower than in 1982.
What to do
More question marks, tested cheaply
BCG's advice is to invest in more question marks, test them quickly and economically, milk cows efficiently and keep pets on a short leash.
From BCG: The Product Portfolio (Henderson, 1970), BCG: What Is the Growth Share Matrix? and BCG: Classics Revisited, the growth share matrix.
How do you use the BCG matrix in a case interview?
In our experience, interviewers rarely want you to name the matrix. They want its logic when a client has several businesses and limited money. Here is what we listen for.
Use relative share, not share
A 25% share means little on its own. Divide by the largest rival's share. Above 1, you lead the market.
Say your cutoffs out loud
What counts as high growth depends on the economy and the industry. State the number you are using and check it with the interviewer.
Follow the cash
The matrix is about which businesses make cash and which need it. Show where each dollar comes from and where it goes.
End with a decision per business
Invest, hold, test or exit, with the reason and the risk. A grid of labels is not a recommendation.
6 case questions where the BCG matrix helps
Each of these asks where a company should put its money. Under each is what a strong answer does.
Invest, hold or exit
Several businesses, limited money.
One of your client's three divisions is losing money. Should they fix it, sell it or close it?
Places the division against its market's growth and its own share, then checks what it shares with the other two before deciding. Practice it, see a model answer
A gym chain wants to double its revenue in five years. How would you approach the problem?
Treats each growth option, new cities, new formats, online, like a business on the matrix: how fast that market grows and whether the chain could lead it. Practice it, see a model answer
A leading shampoo brand has lost five points of market share in two years. What would you look at?
Uses one idea from the matrix: relative share. Is the brand still the leader against the largest rival, and is the market still growing? Then the profit tree. Practice it, see a model answer
Question marks
A fast growing market where the client is small.
A large food company wants to acquire a plant-based snack startup. Should it?
Treats the startup as a question mark: checks the market's growth, the share it could reach and whether the buyer's cash cows can fund it. Practice it, see a model answer
A consumer goods company is deciding whether to launch a premium pet food line. How would you structure the decision?
Sizes the premium segment's growth and asks whether the company can lead it, or would sit at a low share for years. Practice it, see a model answer
Close the case
One decision per business.
You have finished the analysis on a market entry case and the CEO walks in. What is your recommendation?
Leads with the answer, then where the money comes from, where it goes, the main risk and the next step. Practice it, see a model answer
What are the limits of the BCG matrix?
BCG's own 2014 revisit names the first two. The rest are common mistakes we hear in practice cases.
Share is not the whole story
BCG's own 2014 revisit says market share is no longer a direct predictor of sustained performance. Back up a high share with margins or growth before you call a business a leader.
The picture goes out of date fast
BCG found that by 2012, in 75% of the industries it studied, businesses moved between quadrants much faster than before. Build the matrix from this year's numbers, not last year's plan.
The market definition decides the answer
Define the market narrowly and almost anything leads it. Say how you drew the market before you compute share.
Ignoring links between businesses
A dog that shares a factory, a brand or customers with a star may be worth keeping. Ask what else breaks if you sell it.
Treating the quadrant as the answer
A question mark is a question, not a verdict. The work is deciding whether it can become a leader and at what cost.
Forcing it onto a one business case
The matrix compares several businesses. For one product in one market, use a profitability or market entry structure instead.
Decide where the money goes out loud
Soreno's AI interviewer runs a full case, hands you each business's numbers when you ask, pushes back on your cutoffs and scores the session. Start your free week.
Questions people ask
What is the BCG matrix?
A 2 by 2 grid from Boston Consulting Group that sorts a company's businesses by relative market share and market growth. The four quadrants are stars, cash cows, question marks and dogs (BCG's own name is pets), and each tells you whether to invest, milk, test or exit.
Is the BCG matrix the same as the growth share matrix?
Yes. BCG calls it the growth share matrix. BCG matrix, Boston matrix and BCG growth share matrix all name the same tool.
Who created the BCG matrix?
BCG says Alan Zakon first sketched it and refined it with colleagues, and that founder Bruce Henderson popularized it in his 1970 essay The Product Portfolio.
What is relative market share?
Your market share divided by the share of your largest rival. A business with 25% when the leader has 20% has a relative share of 1.25, so it leads. A business with 6% against a 20% leader has 0.3.
What counts as high market growth?
There is no fixed number on BCG's pages. Pick a cutoff that fits the economy and the industry, say it out loud and use it the same way for every business. Our worked example uses 10% a year.
Is the BCG matrix still used?
BCG's 2014 revisit says yes, with changes: apply it more often, since businesses now move between quadrants faster, and use a better measure of competitiveness than share alone.
Should I draw a BCG matrix in a case interview?
Only when the case has several businesses competing for money. Even then, the interviewer wants the decision for each business and where the cash comes from, not the drawing.
Is the BCG matrix the same as SWOT?
No. The BCG matrix compares several businesses on market growth and relative share to decide where money goes. SWOT lists one organization's strengths, weaknesses, opportunities and threats.