The Boston Matrix
The Boston Matrix is designed to show two aspects of marketing –
• how a firms products are performing (how much market share they
have)
• and how fast is the markets total sales increasing (fast growth, slow
growth)
Combining these two we can have four situations for the firms products
• High market share in a high growth market
• Low market share in a high growth market
• High market share in a low growth market
• Low market share in a low growth market
Each of these categories of product was given a name – these are
shown on the next slide.
Boston matrix
High---------------------------Market growth--------------------------Low
High
Star
Cash
Cow
Market
Share
Problem
Child or ?
Low
Dog
Market
Growth high
Market Share
- high
Star
Stars (=high growth, high market share)
Can use large amounts of cash (marketing ,
pricing discounts) and are market leaders in
the business so they should also generate
large amounts of cash.
Can be highly profitable especially if product
has USP. Even if costs = revenue, marketing
and product development strategies should
be used to hold market share. If successful,
as the market matures the product can
become a highly profitable cash cow.
Cash Cow
Cash Cows (=low growth, high market
share)
Cash cows dominate a mature market
where the product is likely to have an
established identity and brand name.
– coco-cola, mars, walkers crisps.
With a cash cow profits are likely to be
high and cash flow will be positive.
Cash cows will be the company asset
that generates profits that allow
investment in and the development of
new products
Market
Growth Low
Market Share
- high
Dog
Dogs (=low growth, low market share)
Dogs can be profitable products, costs of development are likely to
have been paid back well in the past, marketing costs can be low.
Firms should, when determining strategy for this type of product - minimize the number of dogs in a company - they are unlikely to
have long term futures
- look at gaining positive cash flow, if not sell on
- target niche markets
-consider if product is still part of firms product portfolio that
customer expects to find.
Market Share
- Low
Market
Growth - Low
Problem Child or ?
Problem child (= high growth, low market share)
This type of product has the worst cash flow of any of the 4
product types - high cash demands on marketing and
repayment on R and D and low income due to low market
share
If nothing is done to change the market share, problem
children will simply absorb great amounts of cash and later,
as the growth stops become a dog.
Firms could either invest heavily in a re-launch of product to
increase market share (could be worthwhile in a fast growing
market) or invest nothing and generate whatever cash it can
to minimise losses.
Market Share
- Low
Market
Growth - High
Using the Boston Matrix can help management:see if product mix described by the Boston Matrix fits in with
business objectives
target investment at those product likely to produce long term
returns
encourage continued production even if market is mature or
shrinking
help a firm develop relevant marketing strategies
help management decide on investment decisions
see if a product is worth re-launching