What is BCG Matrix?

The BCG Matrix was one of the first portfolio management tools in strategy, developed in 1970 by BCG founder Bruce Henderson. It helps diversified companies allocate resources across their portfolio. Cash Cows generate excess cash with minimal investment needs—this cash should be reinvested into Stars and promising Question Marks. Stars require investment to maintain their position as the market grows. Question Marks are strategic gambles—invest to become Stars or divest. Dogs should generally be divested or harvested.

The underlying logic is the experience curve: companies with higher market share have lower costs due to accumulated experience and scale economies. Combined with the product lifecycle (high-growth markets eventually mature), the matrix suggests a lifecycle where products move from Question Mark → Star → Cash Cow → Dog.

In case interviews, the BCG Matrix is useful for portfolio strategy and investment prioritization cases. However, recognize its limitations: market share doesn't always equal profitability (niche players can be highly profitable), growth rate isn't the only measure of attractiveness, and the four-quadrant simplification can be misleading.