Boston Matrix Analysis
The Boston matrix is useful for a business with a number of products to assess its
position.
It analyses the market standing of a firm’s products, as well as the future marketing
strategies the business could take next
It highlights the position of the products of a business when measured by market share
and market growth.
The diagram below shows a Boston Matrix.
Each circle in the Boston Matrix represents one particular product or service. The size
of each circle illustrates the turnover of the product or service; the higher the circle
the higher the turnover. The products can be classified according to their market share
and the growth of the market in which they operate.
Cash cows
Are products that have a high market share but are selling in a slow-growing market
In some cases, this type of a product will be the market leader in mature market.
The market may be slowly growing because it has grown in the past leaving little
room for further expansion.
A cash cow has a large market share due to much promotional work will have been
done already (in the past)
The product is likely to have a good distribution system, and customers are aware that
the product exist.
The firm is used to produce the product in relatively large volumes, therefore the cost
per unit would be fairly low. As a result, this type of a product will bring high levels
of cash to the firm.
The cash from this product can be ‘milked’ and injected into some of the other
products in the portfolio.
Question marks or Problem child
These are products that have a small market share of a fast growing market.
They require large amount of promotions to gain or maintain market share
They consumes resources but generates little returns
If a company neglects question marks, they may become dogs, while if a huge
investment is made, then they have the potential of becoming stars
The future of the product may be uncertain, so quick decisions may need to be taken
if sales do not improve. These could include revising the design, relaunching with a
new brand image or even withdrawal from the market.
They require extensive marketing
Stars
These are products that enjoy a large market share that is growing
They are highly successful products for the business, however, they are usually
expensive in terms of marketing.
Money must be spent to ensure they retain their position in a growing market. For
example, they may need to be promoted heavily to maintain customer awareness and
to increase distribution in the market.
There is high possibility of large revenues and profits
Low unit costs of production
Dogs
These are products that have a low market share and are selling in a slow-growing
market.
They are usually outdated products
The dog seems to offer little to the business in terms of either existing sales and cash
flow or future prospects, because the market is not growing.
It may need to be replaced shortly with a new product development.
The business could decide to withdraw from this market sector altogether and position
itself into faster-growing sectors.
Boston Matrix helps a company to decide on which products need marketing support or
which need corrective action. The actions that can be taken could include the following
marketing decisions:
Building – supporting question mark products with additional advertising or further
distribution outlets. The finance for this could be obtained from the established cash
cow products.
Holding – continuing support for star products so that they maintain their good
market position. Work may be needed to freshen the product in the eyes of the
consumers so that high sales growth can be sustained.
Milking – taking the positive cash flow from established products and investing it in
other products in the portfolio.
Divesting – identifying the worst-performing dogs and stopping the production and
supply of these products.
