Benefits of the BCG-Matrix:
- The BCG-Matrix is helpful for managers to evaluate balance in the companies’s current portfolio of Stars, Cash Cows, Question Marks and Dogs.
- BCG-Matrix is applicable to large companies that seek volume and experience effects.
- The model is simple and easy to understand.
- It provides a base for management to decide and prepare for future actions.
- If a company is able to use the experience curve to its advantage, it should be able to manufacture and sell new products at a price that is low enough to get early market share leadership. Once it becomes a star, it is destined to be profitable.
Limitations of the BCG-Matrix:
- It neglects the effects of synergies between business units.
- High market share is not the only success factor.
- Market growth is not the only indicator for attractiveness of a market.
- Sometimes Dogs can earn even more cash as Cash Cows.
- The problems of getting data on the market share and market growth.
- There is no clear definition of what constitutes a “market”.
- A high market share does not necessarily lead to profitability all the time.
- The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or todivest prematurely.
- A business with a low market share can be profitable too.
- The model neglects small competitors that have fast growing market shares.