BCG Matrix
Portfolio analysis started in the mid-1960s with the BCG growth-share matrix. The concept was to position each business within a firm on the two dimensional matrix shown below. The market-share dimension was regarded as pivotal because it reflected cost advantages resulting from scale economies and manufacturing experience. The growth dimension was considered the best single indicator of market strength.
The start (high-share and high-growth) are important to the current business and should receive resources if needed. Cash cows (high-share and low-growth) should be the source of substansial amounts of cash that can be channeled to other business areas. Dogs (low-growth and low share) are potential cash traps because they perpetually absorb cash. Problem childen (low-share and high-growth) are assumed to have heavy cash needs before they can convert into stars and eventually cash cows.
The start (high-share and high-growth) are important to the current business and should receive resources if needed. Cash cows (high-share and low-growth) should be the source of substansial amounts of cash that can be channeled to other business areas. Dogs (low-growth and low share) are potential cash traps because they perpetually absorb cash. Problem childen (low-share and high-growth) are assumed to have heavy cash needs before they can convert into stars and eventually cash cows.
Source: David A. Aaker, Strategic Market Management 7th Edition, 2005, Hoboken
