The BCG matrix and the Internal-External (IE) matrix are designed specifically to enhance
a multidivisional firms effort to formulate strategies. BCG is a private management firm
based in Boston.
The BCG matrix graphically portrays differences among divisions in terms of relative
market share position and industry growth rate. The BCG matrix allows a multidivisional
organization to manage its portfolio businesses by examining the relative market share
position and the industry growth rate of each division relative to all other divisions in the
organization. Relative market share position is defined as the ratio of a divisions own
market share in a particular industry to the market share held by the largest rival firm in
that industry.
Relative market share position is given in the x-axis of the BCG matrix. The midpoint on
the x-axis usually is set at 0.50, corresponding to a division that has half the market share
of the leading firm in the industry. The y-axis represents the industry growth rate in sales,
measured in percentage terms. The growth rate percentage on the y-axis could range from
-20 to +20 percentages, with 0.0 being the midpoint.
A graphical representation of a BCG matrix appears in the following diagram. Divisions
located in Quadrant I of the BCG matrix are called Questions marks, those located in
Quadrant II are called Stars, those located in Quadrant III are called Cash Cows, and those
that are located in Quadrant IV are called Dogs.
Relative Market Share Position
High Low
1.0 0.50 0.0
Stars
Quadrant II
Question Marks
Quadrant I
Cash Cows
Quadrant III
Dogs
Quadrant IV
The BCG Matrix
Question Marks:
