A growth-share matrix, also known as a Boston or BCG growth matrix, creates a visual assessment of products or investments in terms of relative market share and market growth rate. Each investment or product is plotted in one of four positions on the matrix. A product or investment can be considered a star, a question mark, a cash cow, or a dog.
- Dogs - Dogs have low market share and a low growth rate. As their name implies it's a product or investment with little to no potential.
- Question marks - Question marks describe an investment that is growing fast but is not necessarily generating a lot of revenue due to low market share. A question mark may require large sums of investment to keep growing and under the right circumstance it can become a star, but without growth a question mark can quickly become a dog.
- Stars - Stars have a high growth rate in a high growth market. They both make and consume large amounts of capital. As market growth declines and the star holds onto its market share, it becomes a cash cow that can generate revenue for future innovation and investment.
- Cash cows - A cash cow has high market share in a mature, low growth market. They generate more revenue than the resources they consume. They're often used to fund new business ventures and help turn question marks into stars and potential future cash cows.
How to Create a Growth-Share Matrix
- Create a matrix. Create a two-by-two box grid. Label the diagram with a title.
- Create categories. Place a star in the upper left box, a cow in the lower left box, a question mark in the upper right box, and a dog in the lower right box. The star represents high growth and high market share. The cow denotes low growth and high market share (i.e., a "cash cow"). The dog signifies low growth and low market share. The question mark signifies high growth and low market share.
- Add labels. Near the bottom left corner of the grid draw an arrow going upwards and another going to the right. Next to the top left box write "High Growth Rate" and next to the bottom left box write "Low Growth Rate." Beneath the bottom left box write "High Growth Rate" and beneath the bottom right write "Low Growth Rate."
- Identify finances. Determine which products or investments fit in to each of the categories on the matrix and place them where they belong.
- Draw conclusions. Use this diagram to decide where to focus time, effort, and investment capital.