A quick guide to the BCG growth-share matrix.

I often find that students understand the concepts behind the BCG growth-share matrix, but don’t know what ‘numbers’ to use when ‘drawing’ it. So here we are.

The BCG growth share matrix is a tool for the evaluation of the
performance of a company that operates in a number of markets;
i.e. it is a way to examine the portfolio of businesses in which
the firm operates. I have taken an illustration of the matrix
from Hedley’s original 1977 paper. The description of *stars*,
question marks, cash cows, and dogs can be found in Hendley’s
paper.

There are a couple of things to note. Firstly, the y-axis is *Business
Growth Rate*. On this access, the dividing line between *cash cows* and
*dogs* (the bottom half of the matrix) is at 10%. In other words to be
a *star* or a *question mark*, the business needs to be growing at 10%
or more.

The x-axis is the relative competitive position. It is a
logarithmic scale, of a firm’s relative comparative position,
i.e. their relative market share compared to the best competitor
(not oneself). Thus, if my company has 20% market share, and my best
competitor has 10% market share, then my relative competitive
position is ^{20}⁄_{10} which is 2. On the other hand, if my company has
20% market share, and my best competitor has 30%, then my relative
competitive position is ^{20}⁄_{30} or 0.67. On the x-axis, the
difference between *stars* and *question marks* is that stars have a
relative competitive position of more 1.5. However, for *cash
cows* and *dogs*, the difference is that *cash cows* have a relative
competitive position greater than 1.

Of course, the numbers are only approximate. As Hedley (1977, p.13) says, there is “no ‘magic’ that transforms a star to a cash cow as it growth declines from 10.5 to 9.5 per cent”. Indeed, all the lines are just guides.

Finally, to convey the importance of each business being analysed, Hedley recommends that the size of the circle represents either turnover or the number of employees.

## References

Hedley, B. (1977). Strategy and the “business portfolio”.
*Long Range Planning, 10*(1), 9–15.