Boston Matrix Flashcards
What is the Boston Matrix and how can it be used in the marketing department?
A business with a range of products has a portfolio of products. It must decide how to allocate investment across the portfolio.
This decision can be made after analysing the portfolio using the Boston Matrix. This categorises the products into one of four different areas, based on market share and market growth.
What are the characteristics of stars?
What is their growth and market share like? What investment should they get?
Stars are high growth products competing in markets where they are strong compared with the competition.
Often Stars need heavy investment to sustain growth. Eventually growth will slow and, assuming they keep their market share, Stars will become Cash Cows.
What are the characteristics of cash cows? - What is their growth and market share like?
Cash cows are low-growth products with a high market share.
These are mature, successful products with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.
What are the characteristics of cash cows? - What is their growth and market share like? What investment should they get?
Cash cows are low-growth products with a high market share.
These are mature, successful products with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.
What are the characteristics of question marks/problem child? - What is their growth and market share like? What investment should they get?
Question marks are products with low market share operating in high growth markets.
This suggests that they have potential, but may need substantial investment to grow market share at the expense of larger competitors. Management have to think hard about “Question Marks” - which ones should they invest in? Which ones should they allow to fail or shrink?
What are the characteristics of dogs? - What is their growth and market share like? What investment should they get?
Dogs refers to products that have a low market share in unattractive, low-growth markets.
Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Dogs are usually sold or withdrawn from sale.
Give 3 reasons that Cash Cows are important for businesses such as Apple.
- Little need for investment/advertising
- Can use profits to ‘feed’ question marks or stars
- Generate large amounts of cash – good for cash flow
Why is the Boston Matrix useful?
Can be used for analysing product portfolio and then decisions can be made based on important indicators. For example:
- Invest in particular stars
- Reduce investment in particular cash cows
