Once a product has reached the maturity phase , the market will stabilise or shrink with it , and money becomes available . In addition , the thought behind the BCG matrix is the belief that if you are market leader , you can make more profit because you can achieve benefits of scale .
The strength of the BCG model is its directional simplicity : you use the money from the cash cows ( high market share , low growth ) to finance the stars grow ( high market share , high growth ), you say goodbye to the dogs and keep a close eye on the question marks ( both low market share in low growth or high growth markets ). This way the cash flow is distributed within the corporation in the most optimal way .
Porter ' s theory dates back to 1980 , that of Treacy & Wiersema to 1995 . The BCG portfolio matrix was first used in 1969 . The fact that these models are still being used proves their strength , but it is the emerging information society that may not have changed some economic laws , but has put them on edge .
Due to the increasing availability of information , it is also easier for smaller innovative businesses to offer their services and to start competing with the large established players . This promotes continued product rationalisation . By a simpler spread of technology , the number of competitors for a product grows quickly and prices drop . A good example of this is given in Figure 9 , which concerns two reasonably comparable products : the video recorder and the DVD player . The video recorder was developed during a period when information was exchanged relatively slowly , as a result of which competitors took longer to market a similar product . This was markedly different in the case of the DVD player 9 .
Price (€)
1500 Video recorders
1000
500
DVD-players
The accessibility of information and capital
If there is one development that , during the past few years , has been dominant in the way in which consumers and businesses do business , it is the immensely improved accessibility of information . Consumers , purchasing companies and government institutions are now much more aware of what is for sale , and it is becoming increasingly easier for them to compare products and suppliers . It only takes a couple of mouse-clicks and telephone calls with suppliers from all over the world to meet their demands . Online searches and even online auctions are steadily replacing relationship-based sales 8 .
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Figure 9 . Price development of video recorders and DVD players
These developments force providers of products and services to concentrate on those activities in which they can stand out , and for which they can maintain that distinctiveness for a longer period of time . If a product is relatively easy to copy , such as a DVD player , prices will drop fast and it will be difficult to recoup the investment .
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