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.

High

Boston matrix

High---------------------------Market growth--------------------------Low Star Cash Cow Market Share Problem Child or ?

Dog Low

Market Share - high Market Growth 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

Market Growth Low 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 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 Growth - Low Market Share - 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