This tool / tools was developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968. The Boston Consultancy Group (BCG) proposed one of the first ways of classifying business units – according to
⦁ Market growth and
⦁ Relative market share.
Market growth rate reveals the customers attraction on the industry's attractiveness. For example number of users of cell phone. The entire competitors take share in the market growth. Relative market share is calculated by taking the ratio of your own sales to those of your major competitors. It is actual share of a company in the total market growth.
Using the BCG model enables planners to classify their products/strategic business units (SBUs) into four categories according to their position on the matrix. This classification can also help in understanding the nature of the products/SBUs, i.e. whether they are 'cash providers' or 'cash users' (see following figure).
Stars: In this category of matrix, product in markets experiencing high growth rates with a high or increasing share of the market. The SBU may be spending heavily to gain that share, but costs should be reducing over time and, it is to be hoped, at a rate faster than that of the competition.
Following are the gist of star matrix;
⦁ Potential for high revenue growth.
⦁ Growth phase of the product life cycle.
⦁ Represent the best opportunities for expansion.
⦁ Heavy investment is needed to maintain market share and rapid growth potential.
⦁ The firm generally pursues an expansion strategy to establish a strong competitive position.