Learn: The Boston Matrix

Welcome!Today we'll learn about the Boston Matrix. This tool helps businesses analyse their product portfolio and make strategic decisions. Let’s explore how this works!

What is the Boston Matrix?The Boston Matrix is a tool used to evaluate a company’s products or business units in terms of their market share and market growth. It helps businesses decide where to invest resources and which products to develop or discontinue.

The Structure of the Boston MatrixThe Boston Matrix divides products into four categories based on their market share (high or low) and market growth (high or low). Each category represents a different strategy for the product.

The Four CategoriesHere are the four categories of the Boston Matrix:Stars: Products with high market growth and high market share. They require investment to maintain their position but have potential for high profits.Cash Cows: Products with high market share but low market growth. They generate high profits with low investment needs.Question Marks: Products with high market growth but low market share. They require significant investment to increase their market share.Dogs: Products with low market growth and low market share. These are often unprofitable and may need to be discontinued.

Why Use the Boston Matrix?This tool helps businesses allocate resources effectively. By categorising products, companies can identify which products to invest in, develop further, or phase out. It’s particularly useful for businesses with a diverse product portfolio.

How Does It Work?To use the Boston Matrix, businesses plot their products onto a grid based on two factors: market growth (high or low) and market share (high or low). Each product is placed into one of the four quadrants: Stars, Cash Cows, Question Marks, or Dogs.

Strategic ImplicationsThe Boston Matrix helps businesses make decisions such as:Investing in Stars to maintain growth and profitability.Using profits from Cash Cows to fund other areas.Deciding whether to invest in Question Marks or discontinue them.Phasing out Dogs to focus on more profitable products.

Review Time!Great work! You've learned about the Boston Matrix and its categories. Let’s test your understanding with a few questions!