What is a Boston matrix? This ingenious and original way of classifying products was invented by a group of Boston marketers led by Bruce Henderson in the late 60s of the last century. They clearly presented this method in the form of a table of four quadrants. According to Henderson, each product or service can be assigned to one of the quadrants. The vertical axis of the table is the growth rate of the market under study, the horizontal axis is the market share of the product (service). Growth dynamics may vary depending on the economic conditions and needs of the company.
Four types of product (service)
1. Stars are products with a high market share in fast-growing markets. Since they bring the greatest profit, they should be protected, stored, and, of course, create new stars.
2. Difficult children - low market share at high rates of market development. They consume a lot of resources and give a little. If you want to increase the percentage of market share, significant financial injections are required.
3. Dairy cows - these products are characterized by a high market share and low rates of market development. With small investments, they bring maximum profit. Milking cows should be left in the portfolio until the situation changes.
4. Dogs - low proportion and low rates. These are unsuccessful investments that only absorb the resources of the company. It is better to completely get rid of them or at least minimize their presence in the portfolio.
Benefits
In terms of analyzing the company's internal processes, the Boston matrix has a number of advantages:
- gives a generalized picture of competitiveness and demand for the company's products;
- Helps in substantiating various options for marketing strategies;
- focuses on the end consumer, product, production volumes and profit received as a result of sales;
- Shows priority areas when considering different options for marketing decisions;
- represents the most affordable approach for strategic analysis of the company's basket of goods.
disadvantages
In addition to the advantages, the Boston matrix has disadvantages:
- it is focused on companies leading in their niche or striving for leadership;
- The Boston matrix focuses on product strategies and financial flows of the enterprise, although strategies for other work areas are no less important for it: personnel, technologies, management, etc.
- loses its clarity in multi-product manufacturing or requires a more detailed examination of each individual product category;
- from the analysis on this matrix there is practical benefit, but only in terms of stating the results achieved by the company. Without additional research, it does not provide a similar picture for the future.
Of course, the Boston matrix is considered a rather “smart” tool, but in practice the final decision is best made based on the results of not one, but several methods of strategic analysis of the enterprise.