Managing your portfolio with the Boston Consulting Group’s Growth-Share Matrix
The Boston Box, or more accurately the ‘Boston Consulting Group’s Growth-Share Matrix’, provides a useful tool for analysing an organisation’s portfolio of business units, product lines, offerings or activities. It helps businesses to identify which products to invest in (and which not to invest in) depending on their relative market share and the growth rate of the markets they serve.
For example,
‘Cash Cows’ [3] are those products which have a relatively high share of the market, but in a low-growth market. The high market share is good for cash generation, yet the low market growth rate means that investment in promotion is probably not required, thus these products bring in more cash than they use. This cash can be used elsewhere in the business, perhaps in promoting Stars.
‘Stars’ [1] are those products (or business units, or activities) which command a high market share in a fast-growing market. Investment here should bring about good returns.
‘Dogs’ [4], on the other hand, are products with low market share in a slowly growing market. Consider divestment.
‘Question Marks’ [2](sometimes referred to as ‘Problem Children’) are those products with a low market share but in a fast-growing market. The question, or problem, is what to do with them. Will they become Stars – or Dogs?
The Boston Box can also be used in relation to the notion of Product Life Cycle. It may well be that Cash Cows were once Stars, ie good products but the market is past its peak. Milk the cows for cash, but remember that they won’t go on forever. Stars will become cash cows in time and repay the cash which was invested in them as they rose up through the growth phase.
Remember that Market Growth Rate and Market Share are both relative (to other products and to competitors). Using the Boston Box is a matter of art as much as of science. The Boston Box is a tool to be used to help understand the different roles of each of the products in the portfolio, and to provoke debate about devising strategies for dealing with each of them in the context of the organisation’s wider portfolio of assets.
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