The Boston Consulting Group devised the simple matrix, which views the company as a portfolio of businesses, each contributing to the overall growth and profitability of the company. Its focus was on a corporations prime areas of concern – the market and the corporation’s competitive position in that market. The growth-share matrix is useful to a company in three ways
The graphic display gives an effective and efficient illustration of the product/businesses (SBU’s) in the company’s portfolio
It identifies the capacity of the SBU’s to generate cash and the requirements for cash assisting in balancing the company’s cash flow status
The matrix identifies the separate characteristics of each product/SBU and can suggest the strategic direction for each business
To be successful, a company should have a portfolio of products/businesses with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow while low growth products should generate cash (as long as they have a high relative market share)