A question mark (also known as a 'problem child') has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. The result is a large net cash consumption. Question marks - Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. Such businesses are candidates for divestiture. However, dogs are cash traps because of the money tied up in a business that has little potential.

From this reasoning, the BCG Growth-Share Matrix was born.ĭogs - Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firm's other business units that were at a more mature stage and generating significant cash.

Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption. A second assumption is that a growing market requires investment in assets to increase capacity and therefore results in the consumption of cash. This assumption often is true because of the experience curve increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage. This framework assumes that an increase in relative market share will result in an increase in the generation of cash.

Matrix bcg