How does the BCG matrix categorize business units?

The BCG matrix categorizes business units based on two key dimensions: market growth and market share. This approach helps organizations assess their portfolio of business units or products and make strategic decisions based on where each unit stands in relation to these two factors.

Market growth represents the industry’s potential and is an indicator of how dynamic the market is. A high market growth rate suggests that the industry is expanding, creating better opportunities for gaining market share. Conversely, market share reflects the business unit's competitive position within the industry. A higher market share typically indicates a stronger competitive advantage, which can lead to increased profitability.

By placing business units on the BCG matrix according to these criteria, companies can identify which units are "Stars," "Cash Cows," "Question Marks," or "Dogs." This categorization assists in resource allocation, strategic planning, and understanding which units may require investment or divestment.

Other options, while they relate to business strategy, do not accurately represent how the BCG matrix is designed to function. The product lifecycle stages focus more on the developmental phases of a product rather than a direct assessment of market dynamics and competition. Internal capabilities concern the operational strengths of the organization, not the external market conditions. Geographical presence alone does not encaps