What are the limitations of the BCG Growth-Share Matrix?

The BCG Growth-Share Matrix can be used to analyze the competitive landscape by plotting a company's multiple product lines along with their relative market share and against their market growth rate. This allows a company to visualize and understand the performance of its different product lines in relation to each other and the market. It can help identify which products are performing well, which are not, and where there may be opportunities for growth or need for divestment.

The potential risks associated with the use of the BCG Growth-Share Matrix include the oversimplification of reality as it only considers market growth rate and relative market share, ignoring other important factors. It also assumes market attractiveness is solely determined by market growth rate and relative market share, which may not always be the case. Additionally, it can lead to unbalanced portfolios if it's followed without considering other factors.

The BCG Growth-Share Matrix helps in resource allocation by categorizing a company's product lines into four categories based on their market growth rate and relative market share. These categories are: Cash Cows, Stars, Question Marks, and Dogs. Cash Cows have high market share in a slow-growing industry and generate more cash than they consume. Stars are in high growth markets and have high market share. Question Marks are in high growth markets but have low market share. Dogs have low market share in a slow-growing industry. By understanding where each product line falls, companies can allocate resources more effectively, investing in promising areas and divesting in others.