Market growth is one of many factors that determine industry attractiveness and relative market share is only one of many factors that determine competitive advantage.These limitations mean a decline in the once extensive use of this tool. There are some limitations to the use of this popular matrix as well. The market growth rate provides more information about the brand position than just the cash flow and is a good indicator of the strength of the market and its future potential as well as attractiveness to more competitors. This matrix assumes that a higher growth rate is an indicator of accompanying demands for investment. This investment is made into those products which show a good potential for continued growth and success and are expected to provide a return on investment. On the other hand, it also means a higher consumption of cash as investment to stimulate future growth. Market Growth Rate – A higher market growth rate means more earnings and often profits.It shows the brand’s position in relation to major competitors and a likely indication for the future. Another reason for the selection is that this indicator carries more information than just cash flows as is the case in profits. The market share is measured relative to its largest competitor. The belief is that when the company produces more products, it benefits from higher economies of scale and the experience curve which in turn result in higher profits. The reason behind the selection of this metric is based on its relationship with the experience curve. Relative Market Share – A higher market share means higher cash return.The model assumes that one of the main indicators for cash generation is relative market share and the one for cash usage was the market growth rate. The idea that prompted this grid as a while was the need to manage cash flows. On either side of the grid is an indicator marked on the axis.
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