by Angel Rodriguez

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The Boston Matrix, devised by the Boston Consulting Group in the 1970’s, is used to assess the cash usage and cash generation of products by measuring their share in the market and the growth rate of that market. By assessing the position of products against that of the competition, valuable information can be gained to make strategic decisions for future marketing activity.

The matrix has four quadrants: Problem Children, Stars, Cash Cows and Dogs as shown in Figure 1. They are based on the “Market growth rate” (that will require increased investment for any increase in market growth) and the “Relative market share” (that will increase earnings as market share increases). At any given moment in time a product resides in one of the four quadrants as a square - the size represents the amount of cash generated. If we were to consider a successful product through the Product Life Cycle, the location of the square “progresses” through the matrix as shown by the arrow.