The growth-share matrix: managing our portfolio

In 1970, Bruce Henderson from the Boston Consulting Group introduced the Growth-Share matrix, a strategic tool for the management of a company's product portfolio and its business units. The idea behind the model is that long-term value creation requires a combination of existing mature products and services that fuel the business with net income, and a set of growth projects that may consume present financial resources but that will eventually become the pillars of the sustainable mid and long term net revenue.




The Growth-Share matrix aligns the products and services (or business units) of the company in two dimensions: overall market growth and the company's relative market share. Products are then clustered into four major categories: Stars, Question Marks, Cash Cows, and Dogs.

Stars (growing market - high market share): Stars generate high income but also require heavy financial support in order to keep pace with the growing market. If a Star succeeds in maintaining a high market share after the market consolidates, it will eventually develop into a Cash Cow.

Question Marks (growing market - low market share): Question  Marks share some similarities with Stars: they are growth projects in a growing market. However, its relative low market share drags nets resources from the company. Question Marks have the potential to become Stars if they succeed in the struggle with the competition for market share. However, they can also develop into Dogs if they don't reach a minimum volume before the market consolidates.

Cash Cows (mature market - high market share): Cash Cows are dominant products in a mature market. They generate net cash for the company that is used to finance ongoing growth projects (Stars and Question Marks).

Dogs (mature market - low market share): Dogs neither consume, nor generate significant amounts of cash. They are candidates for divestment, as they freeze current company resources that could be used in growth projects.

For those willing to have a deeper insight at how companies analyze and manage their portfolios, the Boston Consulting Group, in collaboration with the University of Freiberg, has recently published a survey on Corporate Portfolio Management at 196 global companies in 20 industries. The full article is accessible through this link