Final answer:
The BCG matrix is a strategic management tool used to analyze a company's portfolio of products or services based on their market growth rate and relative market share. It categorizes products into stars, cash cows, question marks, and dogs. Companies use this matrix to make strategic decisions and allocate resources effectively.
Step-by-step explanation:
The BCG matrix, also known as the Boston Consulting Group matrix, is a strategic management tool used to analyze a firm's portfolio of products or services. It categorizes a company's offerings into four quadrants - stars, cash cows, question marks, and dogs - based on their market growth rate and relative market share.
Stars are products with high market growth rate and high market share, indicating strong potential for future success. Cash cows have high market share but low market growth, generating steady cash flow for the company. Question marks have low market share but high market growth, requiring strategic decisions to either invest or divest. Dogs have low market growth rate and low market share, representing products with limited potential.
For instance, a company may have a star product that is growing rapidly and capturing a significant market share. In this case, the company might invest more resources to further accelerate its growth. On the other hand, a company with a dog product that is declining in a stagnant market may consider divesting or discontinuing the product.