Boston Matrix Flashcards
Boston Matrix
A method of analyzing the product portfolio of a business in terms of market share and market growth
Cash cow
Low market growth- high market share
Product is profitable and creates a high positive cash flow
The cash from this product can be ‘milked’ and injected into some of the other products in the portfolio.
Star
High market growth - high market share
Therefore, promotion costs will be high to help differentiate the product and reinforce its brand image.
Problem child
High market growth - low market share
Consumes resource snot generates little return. It should however have potential as it’s is selling in a marketing sector that is growing fast
Dog
Low market growth - low market share
The dog offers little to the business either in terms of existing sales and cash flow because the market isn’t growing
Evaluation of Boston Matrix
On its own, the Boston Matrix cannot tell a manager what will happen next with any product. Detailed and continuous market research will help.
The Boston Matrix is only a planning tool and it has been criticised for simplifying the complex set of factors that determine product success.
The Boston Matrix assumes that higher rates of profit are directly related to high market shares. This is not necessarily the case when sales are being gained by reducing prices and profit margins.
Strategy for cash cow
Milking – taking the positive cash flow from established products and investing it in other products in the portfolio.
Strategy for dogs
Divesting – identifying the worst-performing dogs and stopping the production and supply of these products.
Strategy for star product
Holding – continuing support for star products so that they maintain their good market position.
Strategy for problem child
Building – supporting question mark products with additional advertising or further distribution outlets.
