The BCG matrix is a 2x2 grid that plots each of your products or business units by market growth rate and relative market share, then sorts them into stars, cash cows, question marks and dogs. It helps you decide where to invest, what to keep and what to let go.
Shopify describes the BCG matrix, also called the Boston Consulting Group matrix, the BCG growth share matrix and the product portfolio matrix, as a strategic planning tool for analysing the value and future potential of distinct business units, including product lines and service offerings. Boston Consulting Group created it in 1968. Shopify says it grew popular through the 1970s and 1980s, especially with Fortune 500 companies with large portfolios, and it's still taught in business schools.
How the growth share matrix is laid out
The Y-axis is market growth rate. The X-axis is relative market share, which Shopify describes as a company's portion of the total market compared with competitors and the overall market size. Higher growth sits higher on the grid, and a larger share sits further to the right.
Stars, cash cows, question marks and dogs
| Quadrant | Market share | Market growth | What to do |
|---|---|---|---|
| Star | High | High | Invest |
| Question mark | Low | High | Research it, then invest or cut |
| Cash cow | High | Low | Keep funding it and use its earnings for stars |
| Dog (or pet) | Low | Low | Divest or liquidate to free up resources |
- Stars have a high share of a high-growth market. Shopify says they generate large cash flows and justify significant investment.
- Question marks sit in high-growth markets but have a low share. They need a decision: invest to win share, or set a cutoff point where they'll be pared back or shut down.
- Cash cows have a high share of a slow-growing market. They keep earning after growth slows, and Shopify says their earnings can fund the stars.
- Dogs, sometimes called pets, have a low share of a low-growth market. Spotting them helps you decide what to divest so resources can go somewhere more valuable.
How to make a BCG matrix in five steps
- Choose your business units. Shopify's example for a tech accessories seller is to treat each product category as a unit: smartphone cases, wired headphones, gaming headsets and smartwatches.
- Calculate each market's growth rate. Subtract the market's initial value from its present value, divide the difference by the initial value and multiply by 100 to get a percentage.
- Calculate your market share for each unit. Divide your revenue by total industry revenue and multiply by 100, over a set period such as a month, a quarter or a year.
- Plot each unit on the grid, higher for faster growth and further right for a bigger share.
- Set a strategy per quadrant, using the table above as your starting point.
Written out, the two formulas are:
- Market growth rate = (present value - initial value) / initial value x 100
- Market share = your revenue / total industry revenue x 100
The catch: the two percentages decide everything
The quadrant names are the easy part. The work is in the two numbers, and both depend on how you define the market.
Shopify's own example shows how one business can hold very different units. The same tech accessories seller might have a low share in smartwatches, a market mostly controlled by the largest competitor and a few big tech companies, but a high share in wired headsets. Smartwatches grow fast, so they land as a question mark. Wired headsets are a slow-growing market where the seller is strong, so they're a cash cow. My reading of that example: draw the market boundary in a different place and a unit can move quadrant, so write down how you've defined each market before you plot anything.
Shopify also adds a fair warning. Companies still need to weigh other things, such as long-term business goals and economic factors, alongside where a unit lands.
Can a small business use the BCG matrix?
Yes. Shopify says that although it's useful for large portfolios, any business with a selection of products or services can use it. Its example is an online cosmetics seller placing its haircare, skincare and makeup categories into quadrants, then deciding next steps such as investing in a growing makeup market. To pick the measures you'll track for each line afterwards, this guide to ecommerce KPIs is a good next read.
BCG matrix vs Ansoff
CFI's one-line distinction is the clearest: the BCG matrix assesses the products or business units you already have, while the Ansoff matrix plans where future growth will come from. Many teams use BCG first to see what they've got, then Ansoff to decide what to add. Either way, it belongs inside a wider plan, and this piece on business plans vs marketing plans explains where it fits.
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The verdict on the BCG matrix
For a small business, treat it as a way to decide what to stop doing. The quadrants make a nice slide, but the value is spotting the dog you keep funding out of habit and moving that effort to a star. Define your markets first, run the two numbers and be honest about what lands bottom left.
Frequently asked questions
What are the four quadrants of the BCG matrix?
Stars, cash cows, question marks and dogs, sometimes called pets.
Who created the BCG matrix?
Boston Consulting Group created it in 1968, and Shopify says it grew popular through the 1970s and 1980s.
How do you calculate market growth rate for a BCG matrix?
Subtract the market's initial value from its present value, divide the difference by the initial value and multiply by 100 to get a percentage.
What is the difference between the BCG matrix and the Ansoff matrix?
CFI says the BCG matrix assesses existing products or business units by market growth and share, while the Ansoff matrix plans where future growth will come from.
