Overview
The BCG Growth-Share Matrix was developed by Bruce Henderson, founder of the Boston Consulting Group, and published in 1970 as "The Product Portfolio" in BCG's publication Perspectives. It emerged from BCG's work on the experience curve — the empirical finding that unit costs fall predictably as cumulative production volume increases — and from the insight that a firm's ability to generate cash depends heavily on its relative market share.
The BCG Matrix places business units or products on two axes — market growth rate (vertical) and relative market share (horizontal) — producing four quadrants with iconic labels:
- Stars (high growth, high share): invest heavily — these are tomorrow's cash generators; they may need cash now to maintain position
- Cash Cows (low growth, high share): harvest — strong market position in a mature market generates cash that funds the rest of the portfolio
- Question Marks (high growth, low share): decide — invest to build share, or exit before the market matures and the unit becomes a Dog
- Dogs (low growth, low share): divest or manage for cash — limited strategic value
The GE/McKinsey Nine-Box Matrix was developed jointly by General Electric and McKinsey & Company in the early 1970s as a more nuanced alternative. Where the BCG uses a single proxy for competitive position (relative market share), the GE/McKinsey model scores both axes using multiple factors:
- Industry attractiveness (vertical): composite score including market size, growth rate, profitability, competitive intensity, and technological requirements
- Business unit strength (horizontal): composite score including market share, brand strength, profitability, production capacity, and margins
The result is a 3×3 grid with three strategic zones: Invest/Grow (strong position in an attractive market), Selectivity/Earnings (middle ground — invest selectively), and Harvest/Divest (weak position in an unattractive market).
When to Use It
When a client is managing a portfolio — multiple business units, product lines, brands, or geographic markets — and needs to make resource allocation decisions: where to invest, where to harvest, and where to exit. The BCG Matrix is faster and more memorable; the GE/McKinsey Nine-Box handles complexity better when a simple two-axis model feels too blunt. These frameworks only make sense when there's a portfolio to evaluate — they're not appropriate for single-business questions.
How It Works
BCG Growth-Share Matrix
- Define each business unit or product as the unit of analysis.
- Determine the market growth rate for each (rule of thumb: >10% per year = high growth).
- Calculate relative market share: the firm's share divided by the largest competitor's share. A ratio >1 means market leader.
- Plot on the 2×2 and assign quadrant labels.
- Assess portfolio balance: a healthy portfolio has Cash Cows generating cash that funds Stars and selected Question Marks.
GE/McKinsey Nine-Box
- Define the business units.
- Score industry attractiveness: select relevant factors (market size, growth, profitability, rivalry, etc.), assign weights, rate each business unit's industry on each factor, calculate a weighted composite score.
- Score business unit strength: same process — select factors (market share, capabilities, margins, brand, etc.), weight, rate, composite.
- Plot each unit on the 3×3.
- Read the strategic prescription for each zone: invest/grow, selective investment, or harvest/divest.
Running It in a Session
Assign team members to score the client's business units on the relevant dimensions — this works well as parallel work during the analytical phase. The BCG Matrix can be sketched in 15 minutes if basic market data is available; the GE/McKinsey requires more judgment about factor weighting.
Force the team to assign a strategic prescription to each unit ("invest," "harvest," "exit") and test whether the portfolio as a whole is coherent and financially sustainable. The Skeptic should challenge whether the quadrant assignments reflect genuine strategic logic — it's easy to produce a matrix that simply confirms the client's existing preferences.
Common Pitfalls
- BCG oversimplification — market share and growth rate capture only part of strategic attractiveness; high-share businesses in fundamentally unattractive industries may be value traps
- Ignoring interdependencies — portfolio units often support each other; blindly harvesting a "Dog" may undermine a "Star" that depends on it for shared infrastructure or customer relationships
- Static analysis — today's Cash Cow was yesterday's Star; the matrix is a snapshot, not a trajectory; use it to inform direction, not to set it in stone
- Gaming the axes — defining market boundaries to produce a favorable relative market share; the framework is only as honest as the data going in
- GE/McKinsey subjectivity — the nine-box is only as rigorous as the weighting and scoring methodology; arbitrary weights produce arbitrary verdicts that look scientific but aren't
References & Further Reading
- Henderson, Bruce D. "The Product Portfolio." BCG Perspectives (1970, Boston Consulting Group)
- Hax, Arnoldo C. and Majluf, Nicolas S. "The Use of the Growth-Share Matrix in Strategic Planning." Interfaces, Vol. 13, No. 1 (1983) — a critical assessment
- McKinsey & Company. "Enduring Ideas: The GE–McKinsey Nine-Box Matrix." McKinsey Quarterly (2008)
Recommended Books
- The Lords of Strategy — Walter Kiechel
- Playing to Win — A.G. Lafley & Roger Martin
- Good Strategy Bad Strategy — Richard Rumelt