One product funds the business today. Another could drive tomorrow’s growth. Learn to tell them apart—and decide where your should go, and why.
Ersin Üstsoy · Stramento
Imagine you have four product lines.
One generates steady cash. Orders for another are growing quickly, but it needs new equipment. A third is selling little in a much-discussed market. Stock for the fourth moves slowly.
You have one budget.
Where should the money go?
To the biggest seller? The fastest grower? Or to turning around the one falling behind?
The helps you compare product lines or business units using two measures: the growth of their markets and their market share relative to their largest competitors. It helps you decide which businesses to grow, which to protect and which to reconsider when allocating resources.1
First, the key point: how do these two measures relate to cash?
THE IDEA TO REMEMBER
helps indicate the cash you may need to keep up.
Relative market share helps indicate your potential to generate cash.
In the original BCG logic, maintaining your position in a rapidly growing market may require more investment in inventory, capacity and customer acquisition. A strong market share may support cash generation through greater sales volume and lower unit costs.2
So “growth = guaranteed cash outflow” and “market share = guaranteed cash inflow” would be misleading. These are indicators used by the model, not actual cash movements. You can hold a large share while selling at a loss. Even when a sale has been made, the customer may not yet have paid.
In its later review, BCG also notes that market share has become a weaker predictor of sustained success and cash generation. Before making a real decision, check profit margins, customer payments and investment needs separately.3
Learn both calculations with one example
Imagine a beverage brand with four product lines: packaged filter coffee, bottled iced coffee, matcha (powdered green tea) and packaged black tea. Let’s start with iced coffee.
The brand, market data and cash figures in this article are fictional teaching examples, not actual market estimates or investment recommendations. We use the same city, the same retail channel and comparable product sizes. Each product line is assessed within its own market.
1. Market growth: how much did the whole market grow?
Suppose total iced coffee sales across all brands in our chosen city and channel were 100,000 bottles last year and 120,000 this year.
(This year’s total market − Last year’s total market)
÷ Last year’s total market × 100
Find the increase: 120,000 − 100,000 = 20,000 bottles.
Divide by the starting size: 20,000 ÷ 100,000 = 0.20.
Convert to a percentage: 0.20 × 100 = 20% market growth.
For every 100 bottles sold last year, 120 were sold this year. That 20% describes growth in the entire market, not your company’s own sales growth.
If the market grows by 20% while your sales rise by 5%, you can lose market share even as your sales increase. For example, sales rising from 10,000 to 10,500 would take your share from 10% to 8.75%: 10,500 ÷ 120,000.
2. Relative : how strong are we compared with our largest competitor?
Relative market share compares your share with that of your largest competitor. If you are the market leader, use the largest player other than yourself as the comparison.4
Of the 120,000 bottles sold this year, suppose you sold 36,000 and your largest competitor sold 24,000. The remaining sales are spread across other brands.
What are we calculating? | Calculation | Result |
|---|---|---|
Your market share | 36,000 ÷ 120,000 × 100 | 30% |
Your largest competitor’s share | 24,000 ÷ 120,000 × 100 | 20% |
Your | 30% ÷ 20% | 1.5 |
1.5 means your sales are 1.5 times those of your largest competitor. It does not mean you have a 1.5% market share. Your share of the market is still 30%.
SHORTCUT · SAME MARKET, PERIOD AND MEASUREMENT BASIS
Relative market share = Your sales ÷ Your largest competitor’s sales
36,000 ÷ 24,000 = 1.5
Both market shares are divided by the same market total, so those totals cancel out. That is why the shortcut works.
Above 1: You are larger than your largest competitor.
Exactly 1: You and your largest competitor are the same size; you are on the boundary.
Below 1: Your largest competitor is bigger. For example, 0.5 means your sales are half theirs.
Keep three things consistent before calculating
Market: Do not compare iced coffee with the entire beverage market. Define the product category, geography and sales channel clearly.
Period: Compare a full year with a full year, or January–September with the previous January–September. Do not present historical growth as a forecast.
Measurement: Compare units with units, or revenue with revenue. Revenue can rise because prices increase. To understand demand growth, also examine an appropriate volume measure such as units, litres or kilograms.
If the previous period’s market size is zero, the standard percentage growth calculation is undefined. If competitor data is missing, mark relative share as “data unavailable”, not zero.
Two numbers, four different situations
For this example, let’s choose a 10% dividing line: 10% or more counts as high growth, and less than 10% as low growth. This is a teaching assumption, not a universal threshold for every industry. In practice, choose and justify your threshold using industry conditions before classifying the businesses.
Product line | Market growth | Our share | Largest competitor’s share | Relative share | Position |
|---|---|---|---|---|---|
Filter coffee | 4% | 40% | 20% | 40 ÷ 20 = 2.0 | Cash cow |
Iced coffee | 20% | 30% | 20% | 30 ÷ 20 = 1.5 | Star |
Matcha | 30% | 10% | 40% | 10 ÷ 40 = 0.25 | Question mark |
Black tea | 2% | 5% | 50% | 5 ÷ 50 = 0.10 | Dog |
One budget. Four different decisions.
Market growth increases upwards; relative market share increases to the left.
High relative share Above the largest competitor · > 1 | Low relative share Below the largest competitor · < 1 | |
|---|---|---|
High growth Here: ≥ 10% | StarIced coffee 20% growth · 1.5 relative share Support growth | Question markMatcha 30% growth · 0.25 relative share Test small, build evidence |
Low growth Here: < 10% | Cash cowFilter coffee 4% growth · 2.0 relative share Protect and generate cash | DogBlack tea 2% growth · 0.10 relative share Reassess its contribution |
Relative share of 1.0: equal to the competitor, on the boundary between columns.
Schematic illustration. Box sizes do not represent sales or profit. Product positions use the fictional data above.
: a strong position in a growing market
The iced coffee market is growing by 20%, and we are 1.5 times the size of our largest competitor. It makes sense to examine the production and distribution capacity needed to support that growth.
But a star does not necessarily leave plenty of cash in the bank. Much of the cash coming in may be needed to fund growth. When buying equipment to fulfil orders, also watch margins and customer payments.5
: a strong product that funds today’s business
The filter coffee market is growing by just 4%, and we are twice the size of our largest competitor. In the model, this position suggests the potential to generate surplus cash after growth investment.2
In our example, we could protect quality and distribution, reduce unnecessary stock and direct part of the resulting cash surplus towards iced coffee capacity. Neglecting a reliable cash generator because it is “no longer growing” can make it harder to fund the rest of the business.
: the market is growing, but our position is still weak
The matcha market is growing by 30%, but we are only a quarter of the size of our largest competitor. Interest is high; whether our brand can gain share remains uncertain.
Instead of launching across the city, we could run an eight-week trial in 10 stores. Set a budget cap, a repeat-order target and an acceptable product margin in advance. If results are strong enough, expand. If not, reconsider the product, price or distribution. We do not have to turn every question mark into a star.3
: low share, slow market; check its contribution
The black tea market is growing by 2%, and we are one-tenth the size of our largest competitor. “Dog” is the model’s traditional label. It does not automatically mean “loss-making” or “shut it down”.4
First ask: does this product generate cash on its own? Does it complete an important customer’s order? Would removing it affect other sales?
If customers buying tea also buy our coffee, its total contribution may be greater than expected. If its contribution is weak, consider cutting slow-selling variants, reducing inventory or exiting the product line.
Why might a cash cow leave more cash than a growing star?
Consider these simplified cash movements for two products over one period. All amounts are in Turkish lira (TRY), matching the original example.
Cash movement | Iced coffee Star | Filter coffee Cash cow |
|---|---|---|
Cash collected from customers | TRY 150,000 | TRY 150,000 |
Payments for products, staff and logistics | −TRY 100,000 | −TRY 100,000 |
Equipment and capacity investment | −TRY 60,000 | −TRY 10,000 |
Net of the movements shown | −TRY 10,000 | +TRY 40,000 |
Both collect the same amount from customers. But iced coffee needs more capacity investment. It requires another TRY 10,000 in funding during this period, while filter coffee leaves TRY 40,000.
These amounts are separate assumptions illustrating the cash logic, not results calculated from the matrix. Tax, financing and other cash movements are excluded from this simplified example. A real statement must include them.
Giving the entire budget to the fastest-growing product could therefore put more pressure on cash than expected.
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