The Boston Matrix PPT

8/8/2019 The Boston Matrix PPT

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The Boston MatrixThe Boston Matrix(Also called the BCG(Also called the BCG

Matrix, the GrowthMatrix, the Growth--ShareShare

Matrix and PortfolioMatrix and Portfolio

Analysis) Analysis)



Focusing effort to give the greatestFocusing effort to give the greatest

returnsreturns If you enjoy visual representations and vividIf you enjoy visual representations and vivid

descriptions of your business then you'll love thedescriptions of your business then you'll love theBoston Matrix!Boston Matrix!

Also called the BCG Matrix, it provides a useful Also called the BCG Matrix, it provides a usefulway of looking at the opportunities open to you,way of looking at the opportunities open to you,and helps you analyze which segments of yourand helps you analyze which segments of yourbusiness are in a good positionbusiness are in a good position and whichand which

ones arent. That way, you can decide on theones arent. That way, you can decide on themost appropriate investment strategy for yourmost appropriate investment strategy for yourbusiness in the future, and where best tobusiness in the future, and where best toallocate your resources.allocate your resources.



Understanding the ModelUnderstanding the Model

Market Share and Market GrowthMarket Share and Market Growth




To understand the Boston Matrix you need to understand howTo understand the Boston Matrix you need to understand howmarket share and market growth interrelate.market share and market growth interrelate.

Market share is the percentage of the total market that is beingMarket share is the percentage of the total market that is beingserviced by your company, measured either in revenue termsserviced by your company, measured either in revenue termsor unit volume terms. The higher your market share, the higher or unit volume terms. The higher your market share, the higher proportion of the market you control.proportion of the market you control.

The Boston Matrix assumes that if you enjoy a high marketThe Boston Matrix assumes that if you enjoy a high market

share you will normally be making money (this assumption isshare you will normally be making money (this assumption isbased on the idea that you will have been in the market longbased on the idea that you will have been in the market longenough to have learned how to be profitable, and will beenough to have learned how to be profitable, and will beenjoying scale economies that give you an advantage).enjoying scale economies that give you an advantage).




The question it asks is, "Should you be investing your The question it asks is, "Should you be investing your resources into that product line just because it is makingresources into that product line just because it is makingyou money?" The answer is, "not necessarily."you money?" The answer is, "not necessarily."

This is where market growth comes into play. MarketThis is where market growth comes into play. Market

growth is used as a measure of a market'sgrowth is used as a measure of a market'sattractiveness. Markets experiencing high growth areattractiveness. Markets experiencing high growth areones where the total market is expanding, which shouldones where the total market is expanding, which shouldprovide the opportunity for businesses to make moreprovide the opportunity for businesses to make moremoney, even if their market share remains stable.money, even if their market share remains stable.

By contrast, competition in low growth markets is oftenBy contrast, competition in low growth markets is oftenbitter, and while you might have high market share now,bitter, and while you might have high market share now,what will the situation look like in a few months or a fewwhat will the situation look like in a few months or a fewyears? This makes low growth markets less attractive.years? This makes low growth markets less attractive.




Note:Note:The origin of the Boston Matrix lies with theThe origin of the Boston Matrix lies with theBoston Consulting Group in the early 1970s. It Boston Consulting Group in the early 1970s. It was devised as a clear and simple method forwas devised as a clear and simple method for

helping corporations decide which parts of theirhelping corporations decide which parts of theirbusiness they should allocate their availablebusiness they should allocate their availablecash to. Today, this is as important as evercash to. Today, this is as important as everbecause of the limited availability of credit.because of the limited availability of credit.

However, the Boston Matrix is also a good toolHowever, the Boston Matrix is also a good toolfor thinking about where to apply other finitefor thinking about where to apply other finiteresources: people, time and equipment.resources: people, time and equipment.



The Matrix Itself The Matrix Itself

The Boston MatrixThe Boston Matrixcategorizescategorizesopportunities into fouropportunities into four

groups, shown ongroups, shown onaxes of Market axes of Market Growth and Market Growth and Market Share:Share:



Dogs: Low Market Share / LowDogs: Low Market Share / Low

Market GrowthMarket Growth In these areas, your market presence isIn these areas, your market presence is

weak, so it's going to take a lot of hardweak, so it's going to take a lot of hard

work to get noticed. Also, you won't enjoywork to get noticed. Also, you won't enjoythe scale economies of the larger players,the scale economies of the larger players,so it's going to be difficult to make aso it's going to be difficult to make aprofit.profit.



Cash Cows: High Market Share / Low MarketCash Cows: High Market Share / Low Market

GrowthGrowth

Here, you're wellHere, you're well--established, so it's easyestablished, so it's easy

to get attention and exploit newto get attention and exploit newopportunities. However it's only worthopportunities. However it's only worthexpending a certain amount of effort,expending a certain amount of effort,

because the market isn't growing and yourbecause the market isn't growing and youropportunities are limited.opportunities are limited.



Stars: High Market Share / High MarketStars: High Market Share / High Market

GrowthGrowth

Here you're wellHere you're well--established, and growthestablished, and growth

is exciting! These are fantasticis exciting! These are fantasticopportunities, and you should work hardopportunities, and you should work hardto realize them.to realize them.



Question Marks (Problem Child):Question Marks (Problem Child):

Low Market Share / High Market GrowthLow Market Share / High Market Growth

These are the opportunities no one knows what These are the opportunities no one knows what to do with. They aren't generating muchto do with. They aren't generating muchrevenue right now because you don't have arevenue right now because you don't have alarge market share. But, they are in high growthlarge market share. But, they are in high growth

markets so the potential to make money ismarkets so the potential to make money isthere.there.

Question Marks might become Stars andQuestion Marks might become Stars andeventual Cash Cows, but they could just aseventual Cash Cows, but they could just aseasily absorb effort with little return. Theseeasily absorb effort with little return. Theseopportunities need serious thought as toopportunities need serious thought as towhether increased investment is warranted.whether increased investment is warranted.



How to Use The Tool:How to Use The Tool:

To use the Boston Matrix to look at yourTo use the Boston Matrix to look at youropportunities, use the following steps:opportunities, use the following steps:

Step One:Step One: Plot your opportunities in terms of Plot your opportunities in terms of

their relative market presence, and market their relative market presence, and market growth on a blank matrix or agrowth on a blank matrix or a worksheet worksheet ..

Step Two:Step Two: Classify them into one of the fourClassify them into one of the fourcategories. If a product seems to fall right oncategories. If a product seems to fall right onone of the lines, take a real hard look at theone of the lines, take a real hard look at thesituation and rely on past performance to helpsituation and rely on past performance to helpyou decide which side you will place it.you decide which side you will place it.



Step Three:Step Three: Determine what you will doDetermine what you will dowith each product/product line. There arewith each product/product line. There aretypically four different strategies to apply:typically four different strategies to apply:



Build Market Share:Build Market Share: Make f urth er i nvest ment sMake f urth er i nvest ment s(for exampl e, t o mai ntai n Star statu s, or tur n a (for exa mpl e, t o mai ntai n Star statu s, or tur n a Qu esti on Mark i nt o a Star)Qu esti on Mark i nt o a Star)

H old:H old: Mai ntai n th e statu s qu o (d o nothi ng)Mai ntai n th e statu s qu o (d o nothi ng) Har vest:Har vest: Redu ce th e i nvest ment (enjoy positi veRedu ce th e i nvest ment (enjoy positi ve

ca sh f l ow a nd ma xi mi ze pr of it s f r om a Star or ca sh f l ow a nd ma xi mi ze pr of it s f r om a Star or Ca sh Cow)Ca sh Cow)

Di vest:Di vest: For exa mpl e, get rid of th e Dogs, a nd For exa mpl e, get rid of th e Dogs, a nd u se th e ca pital t o i nvest i n Star s a nd someu se th e ca pital t o i nvest i n Star s a nd someQu esti on Mark s.Qu esti on Mark s.



Key PointsKey Points

The Boston Matrix is an effective tool for quicklyThe Boston Matrix is an effective tool for quicklyassessing the options open to you, both on aassessing the options open to you, both on acorporate and personal basis.corporate and personal basis.

With its easily understood classification intoWith its easily understood classification into"Dogs", "Cash Cows", "Question Marks" and"Dogs", "Cash Cows", "Question Marks" and"Stars", it helps you quickly and simply screen"Stars", it helps you quickly and simply screen

the opportunities open to you, and helps youthe opportunities open to you, and helps youthink about how you can make the most of think about how you can make the most of them.them.

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The Boston Matrix PPT

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