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These describe a business focused on a particular product-market combination.It is essential that these are mostly independent from each other but have similar structures and resources.The assumption made here is that market growth relates to the opportunity for investments.
Developed by Alexander Michel The Boston Consulting Group (BCG) matrix, also known as growth share matrix, is a tool to manage a company's business portfolio and derive appropriate actions towards a higher total performance.
Depending on the growth rate and market share, each business is individually assigned to one of the four clusters inside the two-dimensional matrix.
The following article will present the matrix developed by Henderson with its foundations and core elements.
Hereafter, the application of the tool is shown with its implications for the business portfolio.
These serve as a guideline for a company's overall strategy.
Finally, limitations of the matrix are discussed based on empirical research and new findings.
When the BCG-Matrix was developed, it met a real market need.
Based on only a limited amount of input data (relative market share and market growth), senior executives gained a clear picture of their business portfolio in an increasingly complex environment.
The reason is, that the stronger the company’s position relative to its competitors, the higher profits should be and the simplest measure of relative competitive position is relative market share.
It can be computed by the market share of a business (i.e.