The 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
• Another definition of the boston matrix

  A portfolio of products can be analysed using the Boston Group Consulting Matrix. This categorises the products into one of four different areas, based on:

  • Market share - does the product being sold have a low or high market share?
  • Market growth – are the numbers of potential customers in the market growing or not
• How is the Boston Matrix constructed?

  The Boston Matrix makes a series of key assumptions:

  • Market share can be gained by investment in marketing
  • Market share gains will always generate cash surpluses
  • Cash surpluses will be generated when the product is in the maturity stage of the life cycle
  • The best opportunity to build a dominant market position is during the growth phase
• What is the Boston Matrix in summary?

  Products / Brands are categorised as either:

  • Stars
  • Question marks (also known as “problem children”)
  • Cash cows
  • Dogs
• A picture of the boston matrix

  Stars

  Question marks

  Cash cows

  Dogs

  
• What is the relative market share?


  Expressed not as a percentage (%), but share in relation to competitors

  • Measures the product’s strength in the market
• What is market growth?

  • Percentage (%) rate of growth of market sales
  • Useful measure of market attractiveness, but not the only one
• What is a Star in the boston matrix?

  • High share of rapidly growing market (ideally market leadership)
  • Product is strong and market is growing
  • Requires high market spending
  • Cash flow may be positive, depending on probability and market share
• What is the strategy for stars in the boston matrix?

  • Invest to sustain growth
  • Maintain or build market share
  • Repel challenges from competitors
  • Create barriers to entry (e.g. branding, customer loyalty, quality advantages)
• What are question marks in the boston matrix?

  • Low share of a fast growing market
  • Cash flow usually negative
  • Products have potential, but future is uncertain
  • Could become either a star or a dog
• What is the strategy for question marks in the boston matrix?

  • Invest to increase market share
  • Try to build competitive advantage; through selective market segmentation and positioning
  • Build selectively and invest in the most likely stars
  • Cash flow likely to be negative
• What are cash cows in the boston matrix?

  • High share of a low growth market
  • Likely to be mature stage in the product life cycle
  • Little potential for growth
  • Large, positive cash flow
• What is the strategy for cash cows in the boston matrix?

  • Defend market share
  • Reduce investment in order to maximise cash flow and profits
  • Use profit from cash cows to invest in stars and question marks to turn them into stars
• What are dogs in the Boston Matrix?


  • Dogs 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 & no real potential
• What is the strategy for dogs in the boston matrix?

  • Not worth investing in
  • Uses up more management time and resources than can be justified
  • Phase out or sell off
• 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
  • Has little or no predictive value
  • Does not take account of environmental factors
  • There are flaws which flow from the assumptions on which the matrix is based
• How can the model be criticised?

  • Market growth is an inadequate measure of a market’s attractiveness
  • Market share is an adequate measure of a products ability to generate cash
  • The focus on market share and market growth ignores issues such as developing a sustainable competitive
  • The product life cycle varies
• Comparison with the product life cycle

  Product Life Cycle

  • Concerned with individual products
  • Focused on Sales

  Boston Matrix

  • Concerned with portfolio of products, brands, and businesses
  • Greater focus on cash flow