Boston Matrix, What is it? And how could it help analyze your work?
If you own a business and seek to develop it continuously, you must rely on analytical tools. In which, these tools tend to help you plan and make effective decisions based on market analysis and the size of your market share.
Therefore, one of the most important tools that could help you with this task is the Boston Matrix – BCG Matrix –
Boston Matrix:
Also known as the Boston Consulting Group (BCG Matrix), or the Share-Growth Matrix
It is a model that helps companies analyze their business or brand portfolio through a simple graph. The Boston Matrix was created and developed by the “Bruce Henderson” Consulting Group in Boston in 1970.
The Boston Matrix was developed to help companies analyze their business and production lines. Therefore, it is one of the oldest-used matrices.
The Boston Matrix is based on two dimensions:
1- The Market Growth Rate – High or Low
2- The Market Share – High or Low
The Boston Matrix is classified into four main categories.
To clarify, the Boston Matrix is used to assess the strategic position of your business and its potentials. By analyzing business portfolios and products, then dividing them into different categories.
Based on this classification, we can easily make decisions about all products. Additionally, understanding which of the products we should invest in most.
The four categories of the Boston Matrix are:
1- Stars
Products in this category usually indicate that the product holds a high market share and a high growth rate.
Therefore, your company should start analyzing the position of this product more often. Hence, to discover the opportunities through which the company’s profits can increase.
In addition, products in this category are considered powerful products compared to the competition. In which, these products could be developed and invested in. As a result, they could be a part of the competitive advantage that distinguishes your business or brand.
– The Market Growth: High
– The Market Share: High
2- Question Mark
The market for this product classification is growing, which means it has the potentials to be successful. On the other hand, its market share is weak, which means that its competitive position is weak.
The life cycle of all products starts here! Therefore, your company should consider investing more often in this category of products.
– The Market Growth: High
– The Market Share: Low
3- Cash Cows
The products with relatively high market share are considered successful products, but they lack high investments to increase the growth of the market rate.
In general, most companies would prefer to keep these products since they are profitable.
– The Market Growth: Low
– The Market Share: High
4- Dogs
The products in this category have a weak position in the market due to their low growth rate. Along with the low-market share as well.
The products in the Dog category rarely generate enough profit to cover their costs. Therefore, they hold low potentials.
With this in mind, if you are thinking about investing in them, you must think very well because they might waste your money.
Most companies get rid of these products.
– The Market Growth: Low
– The Market Share: Low
Success and Disaster Sequence Model
Success sequence:
The success sequence of the Boston Matrix occurs when the “question mark” becomes a “star” and eventually the “star” becomes a “cash cow”.
This is the best sequence that gives enhances corporate profits along with its growth. As a result, we will have a sequence of success, which entirely depends on a successful decision-making process and making the right decisions.
Disaster sequence:
The disaster sequence in the Boston Matrix might occur due to poor decision-making. This resulted in choosing wrong decisions that might do some damage to the company and affect it negatively. Along with the lost products and financial investments as well.
The disaster sequence occurs when a product is in the “cash cow” category then it is moved to a “star” due to the competitive pressure. And finally, the product fails in the competition, so it is moved to the “question mark” category.
Boston Matrix – Four Strategies:
There are four possible strategies for any BCG product:
1) Build
This strategy is applied through increased investment. Where the product is given a boost to increase the product’s market share as a result.
2) Hold
A “hold strategy” is used when a company cannot invest or has other investment obligations. Due to this, it maintains the product in the same quarter/category.
3) Harvest
The company reduces the volume of investment. In addition, it attempts to obtain maximum cash flow from the products. Thus, increasing the overall profitability of the company.
4) Divest
Products are generally divested to release the amount of money held in the business.
In Conclusion,
The Boston matrix is simple and easy to use. Therefore, it can help you visualize how much opportunity each product has quickly, and how you can make the most of it.
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