Boston Matrix

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14 Terms

1
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What is the Boston Matrix?

  • A tool to help businesses decide how to manage their portfolio of

    • Businesses

    • Brands

    • Products

  • A model which helps analyse a firm’s strategic position

2
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How are products/brands categorised in the Boston Matrix?

  • Stars

  • Question marks (also known as ‘problem children’)

  • Cash cows

  • Dogs

3
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What is a relative market share?

  • Expressed not as a %, but share in relation to competitors

  • Measures the product’s strength in the market

4
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What is market growth?

  • % rate of growth of market sales

  • A useful measure of market attractiveness, but not the only one

5
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What are features of stars?

  • High share of a rapidly growing market (ideally market leadership)

  • The product is strong and the market is growing

  • Requires high marketing spending

  • Cash flow may be positive, depending on profitability and market share

6
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What is the strategy of stars?

  • Invest in sustaining growth

  • Maintain or build market share

  • Repel challenges from competitors

  • Create barriers to entry (e.g. branding, customer loyalty, quality advantages)

7
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What are features of question marks (problem children)?

  • Low share of a fast-growing market

  • Cash flow is usually negative

  • Products have potential, but the future is uncertain

  • Could become either a star or a dog

8
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What is the strategy of question marks?

  • Invest to increase market share

  • Try to build a competitive advantage- e.g. through selective market segmentation and positioning

  • Build selectly and invest in the most likely stars

  • Cash flow likely to be negative

9
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What are cash cows?

  • High share of a low-growth market

  • Likely to be a mature stage in the product life cycle

  • Little potential for growth

  • Large, positive cash inflow

10
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What is the strategy of cash cows?

  • Defend market share

  • Reduce investment in order to maximise cash flow and profits

  • Use profits from cash cows to invest in question marks and stars

11
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What are the features of dogs?

  • They are usually:

    • Products that have failed or

    • Products that are in the decline phase of their product life cycle

  • Low share of a low-growth market

  • Not going anywhere and no real potential

12
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What is the strategy of dogs?

  • Not worth investing in

  • Uses up more management time and resources than can be justified

  • Phase out, or sell of

13
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How valuable is the Boston Matrix Model?

  • A useful tool for analysing product portfolio decisions

  • But only a snapshot of the current position

  • Relative market share and market growth are not the only dimensions important to a business

14
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What are the comparisons of product life style and the Boston Matrix?

  • Product Life Cycle:

    • Concerned with individual products

    • Focused on sales

  • Boston Matrix:

    • Concerned with a portfolio of products, brands and businesses

    • Greater focus on cash flow