top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed Product Life Cycles and the Boston Matrix top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed Product Life Cycles and the Boston Matrix Sales Time Effects of Extension Strategies top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed Product Life Cycles and the Boston Matrix Sales/Profits Time PLC and Profits PLC Losses Break Even Profits top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •The Boston Matrix: –A means of analysing the product portfolio and informing decision making about possible marketing strategies –Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968 –Links growth rate, market share and cash flow top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Classifies Products into four simple categories: •Stars – products in markets experiencing high growth rates with a high or increasing share of the market •- Potential for high revenue growth > top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Cash Cows: –High market share –Low growth markets – maturity stage of PLC –Low cost support –High cash revenue – positive cash flows cows top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Dogs: –Products in a low growth market –Have low or declining market share (decline stage of PLC) –Associated with negative cash flow –May require large sums of money to support dog Is your product starting to embarrass your company? top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Problem Child: -Products having a low market share in a high growth market -Need money spent to develop them -May produce negative cash flow -Potential for the future? problem child Problem children – worth spending good money on? top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix Problem Children Stars Dogs Cash Cows problem child Market Growth Market Share High Low High dog cows top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Implications: •Dogs: –Are they worth persevering with? –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? • top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Implications: •Problem Children: –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 it? top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Implications: •Stars: –Huge potential –May have been expensive to develop –Worth spending money to promote –Consider the extent of their product life cycle in decision making • top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Boston Matrix •Implications: •Cash Cows: –Cheap to promote –Generate large amounts of cash – use for further R&D? –Costs of developing and promoting have largely gone –Need to monitor their performance – the long term? –At the maturity stage of the PLC? • top_stripe http://www.bized.ac.uk Copyright 2005 – Biz/ed The Product Life Cycle and the Boston Matrix Sales Time A B C D The product portfolio – four products in the portfolio (1) (1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’ (2) (2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog? (3) (3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’? Importance of maintaining a balance of products in the portfolio at different stages of the PLC – Boston Matrix helps with the analysis