The BCG matrix is ​​a two-dimensional analytical tool used to evaluate a company’s product portfolio. It considers the company’s relative market share and market dynamics, represented by its growth rate. Based on their position on this matrix, the company’s products can be classified into four distinct categories.

Cash cows are products with a significant market share in a stagnant or declining market. These products generally contribute significantly to the company’s profits because the initial investments have already been recouped.

Star products are products with a substantial market share in an expanding market or one with promising growth potential. While these products may not always be the most profitable in the short term, they are considered the company’s future cash cows.

Question mark products are those with a small market share in a rapidly growing market. It can be difficult to decide whether it is worthwhile to continue producing these products based on the prospects for increasing market share.

Finally, “dog” products are declining products that the company keeps on hand to generate some residual profit or to offset remaining production costs.

The BCG matrix was developed in the 1970s by the Boston Consulting Group. While appreciated for its simplicity, it has some limitations, notably its failure to consider product profitability. The tool is often used assuming that the most profitable products are those with the largest market share in a growing market.

A concrete example of the application of the BCG matrix can be presented in a simple and visual way to better understand how it works in practice.