The BCG Matrix is a tool used by organizations to assess the value of the products that they offer in terms of their growth (i.e., how desirable the product on the market will be) and market share (i.e., competitive advantage). Using the model, an organization can determine which products are a worthwhile investment of company money and employee time and effort.
What is the BCG Matrix?
The Boston Consulting group’s product portfolio matrix(BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue, or develop products. It's also known as the Growth/Share Matrix.
According to this matrix, business could be classified as High or low according to their industry growth rate and relative market share.
Relative Market Share = SBU (Strategic Business Unit) Sales this year leading competitors sales this year.
Market Growth Rate = Industry sales this year - Industry Sales last year.
To analyze your own company, first, you'll need data on the relative market share and growth rate of your products or services.
When examining market growth, you need to objectively determine your competitive advantage over your largest competitor and think in terms of growth over the next three years. If your market is extremely fragmented, however, you can use absolute market share instead.