Boston matrix: the essence, advantages, disadvantages
What is the Boston matrix? This ingenious and original way of classifying products was coined by a group of Boston marketers, headed by Bruce Henderson in the late 60s of the last century. Clearly they presented this method in the form of a table of four quadrants. According to Henderson, each product or service can be attributed 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). The dynamics of growth may vary depending on the economic conditions and needs of the company.
Four types of product (service)
1. Stars - products that have a high market share in rapidly growing markets. Since they bring the greatest profit, they should be protected, stored, and, of course, created new stars.
2. Difficult children are a low market share at high rates of market development. They consume a lot of resources and give little. If you want to increase the percentage of the market share requires significant financial injections.
3. Dairy cows - these products are characterized by a high market share and low rates of market development. With small investments, they bring the maximum profit. Dairy 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 firm's resources. It is better to completely get rid of them or at least minimize their presence in the portfolio.
From the standpoint of analyzing the internal processes of the company, the Boston matrix has a number of advantages:
- gives a generalized picture of competitiveness and demand for the enterprise's products;
- helps in substantiating various variants of marketing strategies;
- focuses on the end user, the product, the volume of production and the resulting profit from sales;
- shows priority directions when considering different options for marketing solutions;
- is the most affordable approach for the strategic analysis of the company's market basket.
In addition to the advantages, the Boston matrix has drawbacks:
- it is focused on companies that are leading in their niche or striving for leadership;
- The Boston matrix focuses on the product strategies and financial flows of the enterprise, although strategies in other work areas are equally important for it: personnel, technology, management, etc.;
- loses its visibility in multinomenclature production or requires more detailed consideration of each individual commodity category;
- from the analysis of this matrix there is practical benefit, but only in terms of ascertaining the firm's results. Without additional research, it does not give a similar picture for the future.
Of course, the Boston matrix is pretty"Smart" tool, but in practice the final decision is better to take, based on the results of not one, but several methods of strategic analysis of the enterprise.