BCG Grid Position Significance for Business Strategy: Explanation and Business’s Outlook
The Star category in the Boston Consulting Group (BCG) Matrix plays a crucial role in a company's growth strategy. This category represents business units or products that hold a significant market share in high-growth markets [1][3][5]. The high investment required to maintain the rapid growth and market dominance of stars is justified by their substantial revenue generation [1][3][5].
In terms of strategy, companies typically invest heavily in stars to capitalize on the high growth opportunities and solidify competitive advantages. This investment focus may include increasing production capacity, innovation, marketing, and market expansion to leverage the strong market position within a growing industry [2]. The goal is to ensure that stars maintain or increase their market share, so they can eventually provide steady cash flows with less required investment once their market matures [1][4].
Stars often represent core areas where companies should concentrate resources rather than divesting. Failing to invest may lead to a loss of growth momentum and market share to competitors [3]. The Star category generates a high volume of sales due to its large market share, but if the investment is unsuccessful, it may transition into the Dog category [6].
In dynamic industries, innovative products often replace old ones. Therefore, companies must continuously innovate and develop new products to maintain the Star category's appeal and market position. Competitors, too, may adopt aggressive and effective strategies to shift the position of a Star category [7].
Balancing the product portfolio between Cash Cow, Question Mark, and Star is essential to avoid problems in the long run. A focus on Cash Cow alone can create problems because the market's low growth may only last for a short time. The market can enter a decline stage where the potential money inflow falls immediately [8]. To counteract this, companies must invest and design effective marketing and advertising strategies for the Star category [9].
The Star category continues to dominate the market in the long run, at least until the market reaches a mature stage. However, in the mature stage, a company's market share can fall if it fails to maintain its position [10]. Competitors can take the market leader position if a company fails to adapt to the market and maintain its competitive edge [11].
In conclusion, the Star category is a significant focus for management purposes due to its high market share and growth potential. The strategic allocation of resources towards growth-focused initiatives and sustained competitive leadership is crucial to maintain the Star category's dominance in the market [1][5]. An example of a company that failed to adapt to the market is Nokia, whose market share of global mobile phone shipments fell from 50.9% in Q4 2007 to 3.1% in Q2 2013 [12]. Therefore, it is essential for companies to invest in their Star categories, innovate, and adapt to the market to maintain their competitive advantage.
[1] https://www.investopedia.com/terms/b/bcgmatrix.asp [2] https://www.investopedia.com/terms/b/bcgmatrix.asp [3] https://www.investopedia.com/terms/b/bcgmatrix.asp [4] https://www.investopedia.com/terms/b/bcgmatrix.asp [5] https://www.investopedia.com/terms/b/bcgmatrix.asp [6] https://www.investopedia.com/terms/b/bcgmatrix.asp [7] https://www.investopedia.com/terms/b/bcgmatrix.asp [8] https://www.investopedia.com/terms/b/bcgmatrix.asp [9] https://www.investopedia.com/terms/b/bcgmatrix.asp [10] https://www.investopedia.com/terms/b/bcgmatrix.asp [11] https://www.investopedia.com/terms/b/bcgmatrix.asp [12] https://www.statista.com/statistics/270132/global-smartphone-market-share-held-by-leading-brands/
In the context of strategic management, a company might choose to invest significantly in its Star category, focusing on increasing production capacity, innovation, marketing, and market expansion to capitalize on the high growth opportunities and maintain competitive advantages in the business field [2]. This investment focus aims to ensure that the Star category maintains or increases its market share, generating substantial revenue for the company [1].
