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

• Products/Brands are categorised as either:

  • Stars

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

  • Cash cows

  • Dogs

• Relative Market Share:

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

  • Measures the product’s strength in the market

• Market growth:

  • % rate of growth of market sales

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

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

Strategy:

• Invest in sustaining growth

• Maintain or build market share

• Repel challenges from competitors

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

Question Markets (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

Strategy:

• 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

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

Strategy:

• 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

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

Strategy:

• Not worth investing in

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

• Phase out, or sell of

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

Comparison with the product life cycle:

• 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