1. Boston Matrix
Fred Lee
Period 3

2. What is Boston Matrix?
A tool of portfolio analysis developed by the Boston Consulting Group in the early 1970’s
Well-known management tool used in product life cycle theory
A tool that numerous companies utilize to enhance their products and help decide on their portfolio decisions

3. functions Categorizes products based on market growth and market share
It prioritizes which products of a firm should get more investment and attention, and vice versa
It focuses on a portfolio of products
It focuses on the products’ cash flow

4. Its Essence Products are categorized into:
Question Marks (a.k.a. problem child) : Products with high market growth but low market share
Stars: Products with high market growth and high market share
Cash Cows: Products with low market growth and high market share
Dogs: Products with low market growth and low market share

5. Details #1
Question Mark: Low share, and low market growth -> negative cash flow -> uncertain potential -> can potentially become a star or a dog
Star: High share and high market growth -> The product is relatively strong -> neutral or modest cash inflow

6. Details #2
Cash Cow: High market share, but low market growth -> at mature state of the product cycle -> successful -> unlikely to grow more -> large positive cash flow
Dog: Low market share, and low market growth -> unattractive -> no potential -> failed products or in the decline phase

7. Strategy #1 Question Mark: Star:
Invest for a high market share or divest
Promote the product
Produce selectively, meaning do not produce in excess
Star:
Invest for a sustained market growth
Increase sales and market share
Maintain leadership among the firm’s competitors
Counter challenges from the firm’s competitors

8. Strategy #2 Cash Cow: Dog: Harvest Defend its share
Try for short term profits
Do not need to invest much; in fact reduce investment to maximize short term profits
Use profits to supplement other products
Dog:
Phase out or divest
Do not invest
Its profits should invest in its own product

9. Examples
Star: Walmart -> It has a high market share, and it is growing rapidly too; IPod -> high market share in a growing market, but needed a lot of investment
Question Mark: Panasonic smartphones -> small market share in a rapidly growing market -> customers are aware of Panasonic’s cash cow examples, but unaware of its smartphone market entrance.
Cash Cow: Pepsi -> high market share, but low market growth rate. Customers are already aware of its products, and fluctuate little
Dog: GM’s Hummer -> low market share, and it is not growing much either.

10. advantages Very simple and useful for any companies
Highlights important factors of the firm’s portfolio products
Helps to generalize and make decisions with certain products
Can become an efficient planner tool for firms

11. disadvantages
It only is a “snapshot” of a short-term condition and position
Assumptions on which the matrix is based have flaws
Does not look into environmental forces
The product of cycle is not fixed; it varies over time
Market share itself is sometimes enough to decide if the product is able to generate cash flow