Portfolio Management using the BCG-Matrix
The Boston Consulting Group (BCG) matrix, also known as growth share matrix, is a tool to manage a companies business portfolio and derive appropriate actions towards a higher total performance. Depending on the growth rate and market share, each business is individually assigned to one of the four clusters inside the two-dimensional matrix. Based on that, the optimal combination of individual business strategies is developed to manage a companies business portfolio in such a way, that it can make the most out of its opportunities [1]. Initially developed in 1970 by Bruce D. Handerson [2]., a senior partner of the management consulting firm BCG, the concept has been widely applied since then and can be seen as a foundation for similar tools. Although the BCG describes it still as a relevant tool today, the growth share matrix has been criticized by professionals and academics for its limitations and underlying assumptions. The following article will present the matrix developed by Handerson with its foundations and core elements. Hereafter, the application of the tool is shown with its implications for the business portfolio. These serve as a guideline for a companies overall strategy. Finally, limitations of the matrix are discussed based on empirical research and new findings.
Annotated bibliography
- ↑ Barry Hedley 1977; Strategy and the ¨Business Portfolio¨p. 9-15 Annotation: Hedley, a director of BCG at the time, describes the importance of portfolio management and how the growth share matrix can be used to increase a company's performance.
- ↑ Bruce D. Handerson 1970; The Experience Curve - Reviewed IV. The Growth Share Matrix or The Product Portfolio Annotation: In this article Handerson describes the initial concept of the growth share matrix and outlines the basic underlying assumptions. However, Handerson and employees of the BCG developed the matrix further with minor adaptadtions until 1973.
