Boston Matrix

The Boston Matrix

  • The Boston Matrix is a marketing tool used for product portfolio analysis.
  • It assesses the products of a business in terms of their market share and market growth.
  • It was developed by the Boston Consulting Group.

Components of the Boston Matrix

  • The Boston Matrix is divided into four categories: Stars, Question Marks, Cash Cows, and Dogs.
  • Stars are products with high market share and high market growth rates. They represent the future potential and require significant resources to capitalise on their growth.
  • Question Marks have low market share but high market growth. They could potentially become Stars or fall into the Dogs category, depending on how successfully they respond to the market’s needs.
  • Cash Cows are the most profitable products with a high market share but low market growth. They generate more cash than required to maintain their market share.
  • Dogs occupy a small market share in low-growth markets. They do not generate much profit and may even absorb more cash than they produce.

Using the Boston Matrix

  • The Boston Matrix helps in strategic decision-making by signalling where to invest, disinvest or develop new products.
  • It assists organisations in allocating resources effectively amongst various products.
  • Businesses can use this model to balance their product portfolio, ensuring they have products in every quadrant to maximise growth and profitability.

Limitations of the Boston Matrix

  • It simplifies reality as it only considers two dimensions - market share and market growth.
  • It assumes that high market share results in high profitability, which may not always be the case.
  • Furthermore, it does not consider other factors that might affect product success such as competitive action, changes in consumer behaviour or technological advancements.

Role in Strategic Analysis

  • Despite its limitations, the Boston Matrix is a valuable tool for analysing the strategic position of a business.
  • It provides insights into a product’s life cycle, identifying which products will generate or require cash.
  • By highlighting the strengths and weaknesses of a company’s product portfolio, it guides strategic considerations and helps shape future directions.