Boston matrix A-level business Hodder & Stoughton © 2017

What is the Boston matrix? Otherwise known as product portfolio analysis This theory builds on the concept of the product life cycle but instead of focusing on just one product it looks at all the products sold by a business. It analyses the range of products a company has at any given point in time. It will consider growth rate, market share and cash flow. Hodder & Stoughton © 2017

The Boston matrix Hodder & Stoughton © 2017

What does it mean? Each product classification is important and is based on the relative market share and market growth of the product compared to others in the industry. The four product classifications are: Dog Star Problem child Cash cow Hodder & Stoughton © 2017

Dog This is a product that is struggling with falling sales and market share, e.g. DVDs. The implications are as follows: Are they worth keeping? How much are they costing? Could they be revived in some way? How much would it cost to continue to support such products? How much would it cost to remove from the market? Hodder & Stoughton © 2017

Star This product has seen growth for some time and now has high market share, e.g. Apple iPad. The implications on such products are: huge potential may have been expensive to develop but are now making positive cash flows further expenditure on promotion could prove worthwhile. Could have been a problem child until recently Hodder & Stoughton © 2017

Problem child A product that may have just been launched and has been in the design stage for some time, e.g. Tesla cars. The implications are What are the chances of these products securing a hold in the market? How much will it cost to promote them to a stronger position? Is it worth the risk? You often find these products on Dragons’ Den. Hodder & Stoughton © 2017

Cash cow These are established products that are now starting to see the market saturated and growth has fallen, e.g. Heinz baked beans. The implications are Cheap to promote. Generate large amounts of cash. Use for further research and development of other products within portfolio? Costs of developing and promoting have largely gone. Need to monitor their performance — the long term? At the maturity stage of the product life cycle? Hodder & Stoughton © 2017

Research task Task Research six product examples and place in the grid, e.g. Heinz beans is a cash cow as it has low growth but high share. Heinz Hodder & Stoughton © 2017

Usefulness The Boston matrix is a useful tool not only for the range of products but also for aiding the decision-making process. The matrix allows a business to consider the balance of product classification and the impact on cash flow. Hodder & Stoughton © 2017