When to use the BCG matrix?

 

The BCG matrix is often included in strategy and marketing textbooks. It is often presented because it is a very simple model for students to understand and highlights the relationship between competitive strengths and market opportunities – which is a fundamental aspect of strategy development.

However the model was developed in 1968 primarily for the benefit of large-scale manufacturing base conglomerates who had multiple business portfolios and needed to make multimillion dollar decisions in regards to resource allocation.

As we go forward 50 years, the value of the BCG matrix has been eroded for practical purposes – although it is still a suitable teaching tool as indicated above. Please refer to the section on limitations of the BCG matrix and whether relative market share is still relevant.

Where to use the BCG matrix?

This BCG matrix would be included in the analysis section of a strategic plan or a marketing plan. It is primarily part of the firm’s “internal analysis” – as it considers the relative strengths and opportunities of the firm’s overall portfolio.

It could also be included in the firm’s “competitive analysis” section of the firm’s documented plans if competing organizations and portfolios are also plotted upon the BCG matrix.

Then in the strategy (and perhaps the budgeting) section of the strategic and/or marketing plans, reference should be made to the guidance provided by the BCG matrix (which would have been included in the earlier section/s of the documented plan.)

When to use the BCG matrix?

If you are a strategy or  marketing student completing an assignment, then the BCG matrix would be suitable for use if you are analyzing or planning for a firm that has a large and diverse product portfolio.

In the practical business world, the BCG matrix is suitable for use if:

  • The firm is a large manufacturer
  • The firm has a diverse product range or if they have multiple business units (SBUs)
  • The firm has reasonable levels of market shares in some markets
  • The firm likes to be analytical and take a strategic view of their planning

Please note: The BCG matrix is not suitable for use with small to medium sized businesses – as generally all small-medium businesses would be classified as either a dog or as a question mark at best.