(Bcg) strategic attributes and performance in the bcg matrix

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© Academy of Management Journat 1982, Vol.25, No. 3, 510-531.

Strategic Attributes and Performance in the BCG Matrix— A PIMS-Based Analysis of Industrial Product Businesses^

This paper empirically explores the performance tendencies and strategic attributes of businesses in the four cells of the Boston Consulting Groupproduct portfolio matrix. Businesses differed in their performance and strategic attributes, according to the two dimensions of the BCG matrix—product life cycle stage (growth rate) and market share. Most discussions of business-level strategy fall into one of three groups. First are normative propositions about which strategic actions make sense under different conditions. These prescriptionstypically are set forth by seasoned observers of organizations (Andrews, 1971; Glueck, 1976; Katz, 1970), but, so far, creation of these ideas has substantially outpaced empirical tests of their validity. A second category of literature is empirically based, but aimed at demonstrating universal "laws" of strategy. Findings on the pervasive positive effects of market share (Chevalier, 1972; Schoeffler,Buzzell, & Heany, 1974) and the experience curve (Boston Consulting Group, 1968) are primary examples. The third group also is empirical but concludes that so many contingent factors exist that strategy must be highly situational (Hatten, Schendel, & Cooper, 1978). In the latter vein, Hofer (1975) set forth what he considered to be a manageable list of 20 contingent factors (narrowed down from 54)that affect strategy for
The authors gratefully acknowledge sponsorship by the Strategy Research Center, Columbia University Graduate School of Business, and generous support from the Strategic Planning Institute, Cambridge, Mass. Thomas Lenz, William Newman, Max Richards, Sidney Schoeffler, and Michael Tushman made helpful suggestions on earlier drafts. 510


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mature businesses. All possible combinations of these (assuming only two values per variable) result in over a million possible configurations. What is needed are empirically based "mid-range" theories about business-level strategy. As Bourgeois noted, "The solution is for the researcher to abstract a smaller number of more encompassing conceptual categories with a broader range ofgeneralizability" (1980, p. 29). This paper pursues that advice by focusing on only two key contingent variables—the product life cycle and market share—and identifying their i'elationships with different strategic attributes and performance. The term "strategic attributes" is preferred to "strategic action" because this essentially is a cross-sectional study in which an array of strategicvariables, including those that are controllable only in the longer term (e.g., capital intensity, productivity) are examined. In the literature on business-level strategy, probably no constructs have been deemed more significant than market share and the product life cycle. However, there is little empirical research treating these as contingent factors. The choice of these two constructs has the addedadvantage that, taken together, they form the framework for a widely known model for analyzing corporate strategy—the Boston Consulting Group (BCG) product portfolio matrix (Henderson, 1979). (Purely speaking, the vertical dimension of the BCG matrix is "market growth." For most products, growth rates closely correspond with certain stages of the life cycle. The conceptual distinction is that eachstage typically is attributed with characteristics in addition to growth rate, for example, customer adoption rates and the nature of competition. The emphasis here on life cycle stage is not inconsistent with BCG's strict emphasis on market growth.) If both the product life cycle and market share have major significance, and if many firms actually conceive of businesses along these two...