The BCG matrix, a business strategic framework, was originally developed by the Boston Consulting Group in the 1970s. BCG is a globally used tool for evaluating the performance of a company’s products and services. It helps businesses determine
- Which products should receive more investment to grow,
- Which products are doing well on their own,
- Which ones might need to be discontinued, and more.
Today, we are going to analyze BCG matrix of Amazon in detail. Let’s start with company’s history.
Brief History of Amazon
Amazon.com, founded by Jeff Bezos in 1994, is now one of the largest online retailers in the world. Initially, Amazon focused on selling books, movies, and music. However, it soon expanded to offer a wide variety of other items.
While Amazon is still renowned for its extensive book collection, it now sells electronics, toys, software, home improvement products, clothing, gifts, and whatnot. Amazon is one of the few companies in the world having market cap more than $1 trillion.
Analysis of Amazon BCG Matrix
Amazon’s product range has expanded greatly over the past few decades which makes it interesting to see how these products perform in the market today. Let’s have a look at four quadrants of Amazon BCG matrix.
Stars
Stars are products with a large market share and high growth potential. Investing more in these products can lead to steady revenue. For Amazon, the star product is its online store, Amazon.com. Apart from that, its cloud services and AWS also fall in the same category.
Question Marks
Question marks are new or unproven products with uncertain future performance. In Amazon’s case, Amazon Live and video on demand are question marks. It is unclear whether they will become stars or underperform in the future.
Cash Cows
Cash cows are products that generate steady income but are in slow-growing markets. They do not need much additional investment to keep earning. Amazon’s cash cows are its books and movies, which have been core products since the company started.
Dogs
Dogs are products with low revenue and limited growth potential. Investing in them further could lead to losses. Amazon’s physical stores, which are not widely known, fall into this category. Similarly, Alexa has become a dog as its market share has decreased considerably.
Summing it up
Amazon’s product range has grown significantly which can be categorized in four quadrants of BCG matrix of Amazon as follow.
Stars: Amazon.com, along with its cloud services and AWS, have large market shares and high growth potential, making them key areas for investment.
Question Marks: New or uncertain products like Amazon Live and video on demand have uncertain futures and may or may not succeed.
Cash Cows: Books and movies are steady earners for Amazon, requiring little extra investment as they are in slower-growing markets.
Dogs: Products like Amazon’s lesser-known physical stores and Alexa, which has seen a drop in market share, have low revenue potential and may not be worth further investment.