Boston Matrix
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
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