BCG Matrix: What It Is and How to Apply It in Your Business

The BCG Matrix, also known as the growth–share matrix or the Boston Consulting Group Matrix, is one of the most widely used strategic analysis tools in the business world. Its main purpose is to help companies clearly visualize the position of their products or business units within the market, in order to make sound decisions about investment, development, and profitability.

This tool was developed in the 1970s by Bruce D. Henderson, founder of the consulting firm Boston Consulting Group. Since then, it has become a classic model in marketing and strategic planning, used by both large corporations and small businesses seeking to optimize their product portfolios.

Understanding what the BCG Matrix is and how to apply it can make a real difference in business management, as it allows you to evaluate where to invest more resources, what to maintain as a stable source of revenue, and what to discard due to low profitability.

What Is the BCG Matrix?

The BCG Matrix is a graphical model that analyzes a company’s product portfolio based on two key variables:

• Market growth rate: Indicates how dynamic the sector is in which a product competes. High growth reflects greater opportunities, while low growth suggests a mature or declining market.
• Relative market share: Measures the company’s weight compared to its competitors, meaning the percentage of sales it achieves within the sector.

The combination of these variables is represented in a grid with four quadrants, where each product or business unit is classified according to its performance. This approach helps identify which products generate cash flow, which require investment, and which no longer add strategic value.

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The Four Quadrants of the BCG Matrix

Products in the BCG Matrix are classified into four main categories:

• Stars: Products with high market share in a growing market. They tend to be leaders and generate significant revenue but also require constant investment to sustain their position.
• Cash Cows: Consolidated products that dominate the market in low-growth sectors. They generate stable cash flow and require little investment, making them essential to fund other areas.
• Question Marks: Products in markets with high growth potential but low market share. They require strategic decisions: invest to help them grow or eliminate them if they are not sustainable.
• Dogs: Products with low market share and low growth. They do not generate significant profitability, and in most cases, it is recommended to withdraw them from the portfolio to avoid consuming unnecessary resources.

Why Use the BCG Matrix?

Applying the BCG Matrix offers several strategic benefits:

• Portfolio management: Helps organize different business units and understand their contribution to growth and overall profitability.
• Efficient resource allocation: Makes it easier to identify which products deserve more investment and which should be maintained or reduced in priority.
• Lifecycle analysis: Helps determine whether products are in the introduction, growth, maturity, or decline stage.
• Strategic optimization: Guides decisions on where to invest, maintain, harvest profits, or divest.
• Complementary insights: Can be used alongside other tools such as SWOT analysis, Porter’s Five Forces, or the product lifecycle model to achieve a comprehensive vision.

Strategies Derived from the BCG Matrix

Once products are classified within the matrix, the company must define the most suitable strategies for each quadrant:

• Growth strategy: Applied to question marks with potential to become stars. It involves investing more resources to increase market share.
• Maintenance strategy: Focused on star products that require ongoing support to sustain their leadership position.
• Harvest strategy: Applied to cash cows, aiming to maximize profits with minimal investment.
• Divestment strategy: Applied to dogs, where the decision is to eliminate or minimize them to avoid allocating resources to low-profit areas.

Limitations of the BCG Matrix

While the BCG Matrix is highly valuable, it has limitations that must be considered:

• Over-simplification: It classifies products into only four categories, which may exclude important nuances.
• Limited scope: It only analyzes market share and growth, overlooking factors such as innovation, customer satisfaction, or technological disruption.
• Profitability is not guaranteed: High market share does not always equal higher profits, as margins vary by industry.
• Static view: It does not account for rapid changes in consumer behavior or competitive dynamics.

For this reason, the BCG Matrix should be used as an initial guide and always complemented with other strategic analyses to gain a more complete picture of business reality.

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How to Apply the BCG Matrix Step by Step

1. Define the product portfolio or business units to be analyzed.
2. Calculate the relative market share of each product compared to key competitors.
3. Determine the market growth rate for each product’s sector.
4. Place each product in the matrix according to its performance.
5. Analyze the results to identify which products deserve investment, which to maintain, and which to reconsider or eliminate.
6. Design tailored strategies for each product’s position within the matrix.

This exercise not only offers a snapshot of the company’s current state but also provides guidance on how to move toward sustainable growth.

Analyzing the BCG Matrix makes it clear that it is not just about classifying products, but about guiding business decisions that shape growth and profitability. Understanding the stage of each business unit helps prioritize efforts and design more effective strategies.

If you are considering expanding into the United States, having a solid business structure is the most important first step. At Openbiz, we guide you through the process of creating your company in the U.S. and managing the administrative and tax aspects you need to operate securely in this market. Take the first step and build a strong foundation so your business can grow with confidence.

FAQs About the BCG Matrix

What does it mean when a product is a “Star” in the BCG Matrix?
It means the product has a high market share in a growing market. It is attractive and profitable but needs continuous investment to maintain leadership.

Why are “Cash Cows” so important?
Because they generate stable cash flow and allow companies to fund other, riskier or emerging projects.

Is the BCG Matrix only for large companies?
No. It is also useful for SMEs and startups that want to evaluate their portfolio and make strategic decisions based on data.

What happens if a product falls between two quadrants?
In practice, some products may sit in an intermediate zone. In such cases, it is important to complement the analysis with other strategic tools before deciding.

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