Dublin Institute of Technology
MSc COMPUTING SCIENCE
(Information Technology for Strategic Management)
BCG Growth Share Matrix
Research Assignment No. 2
The BCG Growth-Share Matrix
The BCG Growth-Share Matrix is a portfolio planning model that was developed by Bruce
Henderson of the Boston Consulting Group in the early 1970s. It is based on the
observation that organisations business units can be classified into four categories based on
combinations of market growth and market share relative to the largest competitor. Market
growth serves as a proxy for industry attractiveness, and relative market share serves as a
proxy for competitive advantage. The growth-share matrix thus maps the business unit
positions within these two important determinants of profitability.
Growth Share Matrix (http://www.netmba.com/strategy/matrix/bcg/)
This framework assumes that an increase in relative market share will result in an increase
in the generation of cash. This assumption often is true because of the experience curve;
increased relative market share implies that the firm is moving forward on the experience
curve relative to its competitors, thus developing a cost advantage. A second assumption is
that a growing market requires investment in assets to increase capacity and therefore
results in the consumption of cash. Thus the position of a business on the growth-share
matrix provides an indication of its cash generation and its cash consumption.
Henderson reasoned that the cash required by rapidly growing business units could be
obtained from the firms other business units that were at a more mature stage and
generating significant cash. By investing to become the market share leader in a rapidly
growing market, the business unit could move along the experience curve and develop a
