[PRO Tips] Use the BCG matrix to help you analyze the current situation, product positioning, and formulate strategies

What is the BCG matrix?

The BCG matrix is ​​a simple and useful tool created by the Boston Consulting Group in the early 1970s to help companies conduct product portfolio analysis. It is based on two simple variables: market share and market growth rate, and divides the company's different products or businesses into four quadrants: star products, golden bull products, question mark products and old dog products, thereby helping the company to formulate future products. Development direction and strategy.

What do the 4 quadrants of the BCG matrix represent? How to view product status and positioning

When every enterprise reaches a certain stage of development, it must re-examine its products. In the past, products that were profitable in large quantities have gradually entered bottlenecks, or products that have invested a lot of cost are not favored in the market. Should they continue to invest? Should losses be stopped in a timely manner, or on which type of products should the company invest its limited resources and funds in the next three to five years? These are all problems that companies will encounter in their operations.

Not just enterprises, but even ordinary workers can use this BCG matrix to help them make simple judgments: If you are a marketer and have limited marketing space and advertising budget, how will you arrange product exposure? How to evaluate strategies? You can also use the BCG matrix to help you find the products that are most worth giving a try. At the same time, you can also convince your boss to trust your judgment.

Quadrant 1 - Question Mark - high growth rate, low market share

Question mark commodities have low market shares and high market growth rates and require further investment to realize their potential. Usually these are businesses that have just begun to invest or develop. These products or businesses require more market development and promotion to increase their market share and competitiveness.

We can see that when many large companies launch new products, they sometimes use product or brand sea tactics to launch multiple products on the market at once to test market acceptance. For example, shortly after the smartphone came out, various companies Brands all know that the market will have a high growth rate, but they don't yet know the market's acceptance. Therefore, they launch products in various price ranges, and finally come up with a few affordable prices and a rhythm for launching new phones.

In addition, if they cannot use product sea tactics like large companies to conduct market testing, many new startups will also use agile development methods to gradually test market acceptance and quickly iterate and adjust to cope with the rapidly changing market and create a new market. star product. At the same time, companies must also pay attention to the resource allocation of new and old products when making investments, lest the new products have not yet become star products and the old products cannot continue to bring profits.

Quadrant 2 - Stars - high growth rate, high market share

Star products have high market share and high market growth rate, and are the future growth engines of enterprises. These products or businesses require substantial investment to maintain their high growth and market competitiveness. A star product or business may be a new product or business, or it may be a leading product or business in the enterprise.

When the question mark product passes the market test, it has the opportunity to become a star product, or if the company masters the scarce resources and matches the needs of the market and environment, it may become a star product as soon as it is launched. For example, the high-priced train "Mingri" launched by the Taiwan Railways only has a few trains. Although it was during the period when the country was closed due to the epidemic, it was very popular as soon as it was launched, and it immediately became a star product in tourism.

Star commodities are stocks with the potential to become "Golden Bull Commodities". Star products that already have a high market share and high growth rate have promising prospects, but it also means that they have not yet established a firm footing, and even the cost of investment has not been recovered. They are still burning money to continue to expand their market share, etc., and at the same time, they will attract the attention of their opponents. Price competition, or launching products with higher functions but lower prices to seize the market. Therefore, what is more needed is more care, correction, optimization and investment from the company or team, as well as observing market changes anytime and anywhere. Only then can we Star products are moving towards Jinniu products.

Quadrant 3 - Cash Cows - low growth rate, high market share

Taurus products have high market share and low market growth rate. Usually, such products are almost the backbone of the company, or are the products or services that allow the company to become an industry leader. The market growth rate of the company's products is usually the same as the growth rate of the entire market. same. The market is close to saturation, and it has also brought stable cash flow, becoming the most important commodity that supports the entire company.

The focus of this type of product layout is to maintain stability, maintain the leading position, and grow slightly every quarter and every year, and even eat up micro companies in the same industry to continue to increase share and even further reduce the churn rate. The pursuit of growth rate is no longer the first priority - just like the golden cow product "Original Coca-Cola" of the world's largest beverage company "Coca-Cola" brings the largest revenue, giving them more funds to try to launch new drinks, and Coca-Cola What it has to do is to maintain its leading position, and while competing for territory with PepsiCo, it must also keep the churn rate of its customer base as low as possible.

To take care of this type of product, you don’t need to invest a lot of money and resources like a star product. Instead, you can already grasp the capital cost of investing to get the maximum return. At the same time, you still need to pay great attention to the trends of the market and competitors. The golden bull in the palm of your hand may be assassinated by your opponent with innovative products or services, just like the sudden emergence of ChatGPT, which caused Google to issue a red alert, fearing that it would shake Google's position as the leader in search.

Quadrant 4 - Dogs - low growth rate, low market share

With low market share and low market growth rate, they are usually not the key business of the enterprise and have a high probability of causing losses. This type of goods or services may come from the company's past golden bull products, which have entered a period of decline due to the passage of time and the absence of the market, or they may be question mark products launched by the company during its diversified development. It has been pouring funds but has been unable to capture the market. The market has also entered a saturation period. No matter what the situation is, the company or team should consider giving up the business in the old dog commodity period.

Old dog products usually require a certain amount of machinery, labor and other costs, but cannot generate profits. Many companies are nostalgic for this once brilliant product, but do not discontinue it, abandon it, or actively transform it. It is very likely that the company will become a very difficult product. The big "money pit" causes companies to decline as they age. Faced with old dog products, we must carefully evaluate whether it is time to transform or exit the market.

BCG matrix analysis: 4 aspects to establish strategies

Making good use of the BCG matrix can help companies evaluate products and services in the market and choose the best strategic direction. But how to use it well? The following four aspects can be considered simultaneously when using the BCG matrix.

1. Product portfolio optimization

The BCG matrix can be used to evaluate a company's product portfolio to determine which products are gold bulls, question marks, or potential future stars. This allocates corporate resources to the most valuable products and inspires future growth. There is even an opportunity for Taurus products to be sold together with star products, so that the big ones can lead the small ones, so that star products can quickly gain a foothold in the market and further join the ranks of Taurus.

2. Resource allocation

The BCG matrix can help companies decide on priorities for resource allocation. For example, companies can allocate more resources to star products and question mark products in order to quickly expand market share and increase revenue. At the same time, the cost of Taurus products can be controlled to ensure stable profits.

3. New product development

The BCG matrix can help companies evaluate the potential and feasibility of new products. For example, after a new product is launched on the market, it should be classified as a question mark or star product, or a period of time for a product to go from question mark to star will determine whether the company should invest more resources in promotion and development.

4. Market operation strategy: BCG matrix can formulate different market operation strategies for enterprises to meet different product and service needs. For example, for Jinniu products, a given cost should be used to stabilize the leading position or market share and reduce the customer churn rate. It is necessary to strengthen the evaluation of star products to determine whether continuous investment of resources can become another golden cow of the company within a certain period of time. However, question mark products are mainly focused on seizing market share, and different teams may be needed within the company to respond to different needs. commodity.

Advantages and Disadvantages of BCG Matrix

advantage:

1. Simple and easy to understand: The BCG matrix is ​​simple and easy to understand and does not require much professional knowledge, so it can be widely used.
2. Visualization: The BCG matrix is ​​displayed in a chart, allowing people to intuitively understand the company's product portfolio.
3. Stimulate thinking: The BCG matrix can stimulate people's thinking and discussion on product strategy and help form decisions that are more beneficial to corporate development.
4. Objectivity: The BCG matrix can objectively evaluate the position of a company's products or business in the market, helping companies make more informed investment decisions.

shortcoming:

1. Oversimplification: The BCG matrix divides an enterprise's products or businesses into four quadrants. Such simplification may cause some products or services to be incorrectly classified into a certain quadrant.
2. Emphasis on market share: The BCG matrix focuses on market share and ignores other factors, such as quality, innovation, etc.
3. Not applicable to all enterprises: The BCG matrix is ​​suitable for relatively stable market environments, and assumes that enterprises have a relatively fixed product portfolio, so it is not applicable to all enterprises, especially for rapidly changing markets and innovative enterprises.
4. Biased toward the present and lacks future-orientedness: The BCG matrix only considers the current market situation and lacks consideration of future trends and development directions, which may cause companies to miss potential development opportunities.

In summary, the BCG matrix is ​​a simple and effective tool that can help companies evaluate the market share and market potential of their different products or business lines, and then formulate corresponding strategies. However, the BCG matrix also has its limitations and limitations. For example, the BCG matrix assumes that the market growth rate and share are relatively fixed, but in reality, these factors may change at any time. In addition, the BCG matrix lacks consideration of environmental factors: such as competitors, changes in technology and the economic environment, etc. These factors may have a significant impact on the performance of a company or product.

Therefore, when using the BCG matrix, business managers should clearly understand its limitations and conduct comprehensive analysis and judgment in conjunction with other tools and information; at the same time, make appropriate adjustments and applications based on the characteristics and circumstances of the enterprise, so that the BGC matrix can play its role. functions without being limited or misled by it.