There are several ways for you to invest your money. Stocks, bonds, and mutual funds are a few of the most common investments that you can avail of. However, do you know which one will actually make you earn more money? Some people claimed that stocks earn more compared to bonds. Many people, however, said otherwise in their investment proposal. It’s confusing, right? Deciding which business products to focus on fro the several products that your company provides can be as confusing as choosing the best investment to invest with. Luckily, there are many business tools that you can use to deal with these situations, such as the Boston Matrix, which we will explain further in this article.
What is the Boston Matrix
Commonly called a product portfolio matrix, Boston Box, BCG-matrix, Boston Consulting Group analysis, and portfolio diagram, Bruce D. Henderson of Boston Consulting Group, developed Boston Matrix in 1970. Through this essential framework, businesses can analyze their business lines or products according to their sales potentials, giving them an idea of how to allocate their resources. It also allows business leaders to come up with better decisions in terms of brand marketing, portfolio analysis, product management, and other significant areas of a business.
The Four Categories of Boston Matrix
The Boston Matrix model consists of four classifications based on its market shares and growth rates, which are cash cows, dogs, question marks, and stars.
The products in this group possess the lowest market among the four classifications. Meaning, these products, most likely, generate low cash returns. However, this is not always true, since some products under the dog category become more profitable in the long run with the proper sales plan and sales strategy. In fact, many companies make use of these products by bundling them to other products, which can potentially produce a significant amount of cash. That’s why it is crucial to regularly conduct a product analysis to determine the most efficient method among the different techniques that can potentially boost a product’s sales.
2. Cash Cows
The products in this category produce more profits. You can use these products to gain more cash, which you will, then, apply to support the star products. However, take note as well that even though these products intend to promote the star products, in some scenarios, cash cow products are capable of innovating new products or processes, which can turn into new stars.
These products have a high market share that can compete in a fast-growing industry. Stars are the products that you can expect to turn into cash cows. However, you should take note that not all products from this category can generate cash flow. Since these products are in the fast-growing industry, there are chances for the other products to outcompete these products. If that happens, the products will eventually fall to the dog section.
4. Question Marks
From the word itself, these products are questionable and require more attention. These products can become stars in the future, but since they produce a low amount of cash, there are also chances for these products to create losses instead of a profit. To ensure that you can apply the proper method to these products, you have to conduct tests, such as product competitive analysis.
8+ Boston Matrix Samples
Now that you know the different classifications of Boston Matrix let’s take a look at the following Boston Matrix examples and templates. You can download these zipped documents in PDF and Microsoft Word formats.
1. Boston Matrix Sample
2. Boston Consulting Group Matrix
3. Boston Matrix and Product Life Cycle Template
4. Standard Boston Matrix Sample
5. Boston Matrix in PDF
6. Boston Consulting Group Portfolio Matrix Sample
7. Boston Matrix Modification Template
8. Printable Boston Matrix Template
9. Boston Matrix in DOC
Steps in Using Boston Matrix
Due to its several limitations, the Boston Matrix analysis has lost its importance. Nevertheless, you can still rely on using this tool by following the steps below.
1. Choose a Business Line
Whether it is a strategic business unit or an individual product, you can analyze it through a Boston Matrix. The whole analysis will focus on this unit or product.
2. Define the Market
Once you have determined the product to analyze, you will have to describe its market. This part is crucial because if you define it incorrectly, you may incorrectly assign the product to the wrong category. To ensure that you are providing the correct market details, conducting market research can be a big help.
3. Compute the Relative Market share
Assuming that you have defined the market of the product correctly, you can quickly get the relative market share of the product by dividing its market share by the market share of its biggest competitor.
4. Determine the Growth Rate
Get the market growth rate of the product. Usually, you can find these numbers on the internet for free. You can also obtain it by getting the average revenue growth rate of the leading players in the industry. Take note, though, that you can only measure it in percentage terms.
5. Draw Circles on the Matrix
Once you reach this stage, you should already have all the necessary data. You will use these details in outlining the matrix. Start by sketching circles for each product. Take note, though, that the size of the ring should match the proportion of the business revenue of each product.
A Boston Matrix is indeed an essential tool to determine the right product to focus on to maximize the profit of a business. It also allows you to pick the best method in handling an area of your business. With the information that we have provided in this article, you should be able to enhance the business strategy that you currently use for your organization.
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