The Boston matrix, also known as the BCG (Boston Consulting Group) matrix or Growth/Share matrix, is an analysis tool used for long-term strategic planning and decision making. It can allow you to monitor and analyse your organisation’s portfolio of goods and/or services. Therefore, the matrix tends to be most useful for businesses that offer several different goods or services or ones within which defined Strategic Business Units (SBUs) are present.

Developed by BCG founder Bruce Henderson in 1970, this matrix, despite its limitations, is still highly relevant today as it can aid your organisation in effective resource allocation, prioritising certain areas of research and development, or deciding whether to discontinue a particular range of products or services.

Through the matrix, you can analyse the value of a good or service towards your organisation based on your business’ competiveness in that market and the attractiveness of the market due to its growth. Therefore, the horizontal axis of this four-cell matrix represents relative market share, and the vertical axis represents the rate of growth of the market share.

High Market Growth & High Market Share

Called Stars, these products, services or SBUs are owned by businesses that hold a high market share of a fast growing market. They bring in decent profits and can secure the future of a business. They have potential for growth in the future and, therefore, companies should invest substantially in their research and development to secure their generally higher Return On Investment (ROI).

Low Market Growth & High Market Share

Called Cows, these are products, services or SBUs which bring in the cash. Their market experiencing low growth, organisations should exploit these to have cash to re-invest, and it is generally recommended to re-invest that revenue in ‘Star’ offerings or potentially Question Marks to support greater potential for growth. Therefore it is said that these offerings should be ‘milked’, without killing them, to maintain a steady cash flow.

High Market Growth & Low Market Share

Called Question Marks (or Problem Children), these are products, services or SBUs in which an organisation should invest more research. Typically, organisations would have a small share of Question Marks in fast-growing markets. The decision about whether to keep or discard these products or services depends on their potential to become Stars (typically requiring significant investment) or whether they are more likely to turn into Dogs.

Low Market Growth & Low Market Share

Called Dogs (or Pets), these are products, services or SBUs which are not generating or contributing much to profits. Dogs can be evidence of failure, or of a mature declining market. For example, cash Cows often end up as Dogs at the end of their product life cycle. Either way, organisations need to decide whether the investment in such products or services can be spent better elsewhere. Usually organisations plan to divest, liquidate, or re-invent such products. Very rarely, they are maintained for strategic purposes such as to maintain a competitive advantage or for traditional reasons.

Conclusion

Keeping in mind the limitations of this matrix, such as its assumption of there being a disconnect between ROI and Market Share, and the remaining question mark of what to do with Question Marks, this tool could help you get some clarity about other tough decisions. After answering questions around the relevance of different markets and your current market share in each, you could now try to draft up this matrix for the products and services offered by your organisation.