IB Business Management HLTopic 6 — The Business Management ToolkitPapers 1, 2 & 3Planning tool~10 min read
Using the BCG Matrix
A business with ten products has one hard question: which ones get the marketing budget? The BCG matrix answers it by plotting every product against two things — how much of the market it holds, and how fast that market is growing.
📘 What you need to know
Two axes: relative market share (how big you are versus rivals) and market growth rate (how fast the whole market is expanding).
Four categories: stars, question marks (problem children), cash cows, dogs.
The point is cash flow. Cash cows generate it, question marks and stars swallow it.
A healthy product portfolio has products in more than one box, so today’s earnings pay for tomorrow’s.
Products move over time. A question mark can become a star, and a star becomes a cash cow once its market matures.
The matrix suggests where to spend. It does not tell you whether the spending will work.
The four boxes
Market share tells you how strong you are. Market growth tells you how much is still up for grabs. Put those together and each product lands in one of four places, each with its own cash story.
Watch the top axis. High share sits on the left in the standard BCG layout, which is the opposite way round to most graphs you have drawn.
The cash story behind each box
Every category is really a statement about money coming in and money going out.
Product type
Cash coming in
Cash going out
What managers usually do
Star
High
High, to fight off rivals in a fast market
Keep investing; protect the lead until growth slows
Question mark
Low
High, to try to build share
Choose: back it properly, or stop wasting money
Cash cow
High
Low, the market is settled
Spend little, take the profit, fund other products
Dog
Low
Low, but still eats shelf space and attention
Withdraw, or keep only if it supports something else
The word people forget is relative. Market share is measured against your biggest rival, not against the whole world. Holding 20 per cent when the leader has 60 is weak. Holding 20 per cent when nobody else has more than 5 is very strong.
Products move around the grid
The matrix is a photograph, but products do not stay still. The usual journey looks like this:
The normal life path
Question mark → Star → Cash cow → Dog
A new product launches into a fast-growing market with almost no share, so it starts as a question mark. If investment works, share rises and it becomes a star. Eventually the market matures, growth slows, and the star becomes a cash cow that quietly funds everything else. When rivals or new technology take share away, it slips into the dog box.
Not every dog is worthless. A low-share, low-growth product may still be worth keeping if it completes the range, attracts customers who then buy something profitable, or shares a production line and covers some fixed costs.
Worked examples
WORKED EXAMPLE
Define the term product portfolio. [2 marks]
Step 1: the meaningA product portfolio is the full range of goods and services a business currently offers for sale [1].Step 2: add precisionIt covers every brand and variety on sale at one time, which is what allows a business to compare them side by side [1].2 marksshort, precise, uses business language
WORKED EXAMPLE
Nordvik Drinks sells four products. Classic Cola holds 45% of a market growing at 1% a year. Cold Brew Coffee holds 30% of a market growing at 14%. Sparkling Yuzu holds 3% of a market growing at 18%. Diet Lemon holds 4% of a market growing at 0%. Place each product in the BCG matrix. [4 marks]
Step 1: sort by growth first, share secondGrowth above roughly 10% counts as high here; the two 1% and 0% markets are clearly slow.Step 2: place each oneClassic Cola — high share (45%), low growth (1%) = cash cow [1]Cold Brew Coffee — high share (30%), high growth (14%) = star [1]Sparkling Yuzu — low share (3%), high growth (18%) = question mark [1]Diet Lemon — low share (4%), no growth (0%) = dog [1]Cash cow, star, question mark, dogsay the share and growth figure out loud each time — it proves you used the data
WORKED EXAMPLE
Nordvik has a budget for one promotional campaign. Recommend which product it should support. [10 marks — extract]
Recommendation with a chain of reasoningNordvik should spend on Cold Brew Coffee, its star. It already holds 30% of a market growing at 14%, so promotion defends a strong position rather than trying to build one from nothing, and each extra point of share in a fast market is worth more in future revenue than the same point in Classic Cola’s flat market.The other side, honestly givenThe risk is that stars attract rivals, so the spending may only hold the position rather than grow it, and Classic Cola’s profit is what pays for the campaign in the first place. Sparkling Yuzu might grow faster in percentage terms, but from 3% it would need far more than one campaign.JudgementOn balance, back the star while the market is still growing. Revisit the decision if Cold Brew’s growth rate falls below Classic Cola’s profit contribution.Support Cold Brew Coffee10-mark answers need both sides plus a clear decision at the end
How good is the tool?
Strength
Weakness
Simple picture that managers can agree on quickly
Only two variables; ignores brand, costs, quality and staff
Makes cash flow between products visible
The line between “high” and “low” growth is a judgement call
Stops a business over-funding products that will never win
Labelling a product a “dog” can become self-fulfilling once staff stop trying
Encourages a balanced portfolio instead of one hit product
Ignores links between products, such as a loss-leader that pulls in buyers
Works well with Ansoff, since new products enter as question marks
Needs accurate market share and growth data, which small firms rarely have
💡 Exam tips
Always quote the numbers from the case study when you classify a product. Share and growth, both of them.
Use the proper terms. “Problem child” and “question mark” are both accepted; “bad product” is not.
When recommending, say where the money comes from. Usually the cash cow. That single sentence lifts an answer.
If growth figures are missing, say what you would need and make a reasoned assumption rather than guessing silently.
For 10-mark questions, cover products from at least two different boxes so your analysis is comparative.
Close by naming a limitation of the matrix itself. It shows judgement of the tool, not just of the products.
⚠ Common mix-ups
Putting high share on the right. The standard BCG layout puts high relative share on the left.
Confusing market growth with sales growth. The axis is the whole market, not just your sales.
Thinking cash cows should get the marketing budget. They mainly need protecting, not pushing.
Assuming every dog must be dropped. Check what it supports first.
Calling a brand-new product a dog because it has low share. If the market is growing it is a question mark.
Treating the matrix as a decision. It sorts products; managers still decide, using cost and risk data too.
Up next: Writing a Business Plan — the document that pulls SWOT, STEEPLE, Ansoff and BCG together and puts them in front of a bank manager.
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