The Boston Matrix. The Boston Matrix is a tool to help a business, one business, understand its product portfolio. So one business, like Apple, sells lots of products, lots of different products, being its product portfolio. In the case of Apple, it sells iMacs, it sells iPhones, it did sell iPods. You get my point. So In terms of the Boston Matrix, this is what it looks like. You have axis, so you have market growth, so how quickly the market you are in is growing. And on the other axis, you have market share, so how much do you, your business, have of that market? Now, depending on if you have low or high market growth or low or high market share, then you will fit into one of the quadrants, one of the four different boxes being question marks, stars, cash cows, dogs. Now, a thing just to be aware of the Boston matrix is sometimes it's quite counterintuitive because you actually have low to high on your axis here and low to high on your axis here for market growth. That's why you have stars in the top left. Now, let's go through. all the variations within the Boston Matrix. Now, for all of these four quadrants, I'm going to look at them systematically and look at the situation you're in, the impact of that situation, the hope, what you want to be next, how you could relate that to the product life cycle, and finally, how you could do some analysis in other areas and relate it to the Boston Matrix. Let's go. So I'm going to start with question marks. Question marks is that you have a low market share, but you're in a market that is growing quickly. A low market share in a market that is growing quickly. So if you're in a market that's growing quickly and you don't have much of it, you probably will do lots of investment. That could be investment in new ideas, research and development, or it could be investment in your marketing to get yourself more known within the market you're in that is growing really quickly. Either way, that's going to require lots of cash. Where are you getting this cash from? Your hope, if you are, question mark, is... You want to move eventually to this phase here. You want to get a higher market share and you know the market you're in is growing. So your hope is that actually you will eventually become a star. To relate question marks to the product lifecycle, well, it's likely you're going to be in the introduction stage of the product lifecycle. And that really means you're at the bottom end of that. So you're going to have lower cycles. And we've already seen the impact of being in this box is you're going to have to do heavy investment. and that's going to kill your cash flow. So you've got a problem here because you're spending a lot on your investment, your marketing, and you're not getting much in in terms of your sales. So at this point, you need to have checked your sources of finance. That's one. Do you have the cash to be able to do this? And also, you might want to do ARR, average rate of return, to check that this project, this product that you're taking on is worth it and it's going to meet your hurdle, meet your expected return. So you need to be aware that in... A question mark phase is likely you're going to have a negative cash flow. So if you were a question mark, your hope is that you will move on and become a star. A star is when you have high market growth and you have high market share. And with that, that situation of high market share, high market growth, well, the impact is it's likely you're going to have to do lots of marketing because it could be that because, yeah, you have a high market share, but the market is growing really quickly. So that's going to incentivize new competitors, new companies entering the market, getting involved, seeing that profit and thinking, I want some of that. So you. As the current frontrunner in this fantastically new market area that's growing very fast, you need to use some marketing to protect your USP, protect your unique selling point. And that marketing that you do to act as a barrier to entry for other competitors coming into your industry, well, that's going to cost a lot. So that's going to be lots of cash expenses. Your hope is that eventually, well, that eventually the market growth will slow down and that you will become a cash cow and that you will be milking the market for all those sales. But if you relate this to the product lifecycle, well, you could see this as the growth stage of the product lifecycle, that second phase. And if you're in the growth stage of the product lifecycle, it's likely you're really starting to accelerate in terms of the sales that you're making. Not the maximum yet, but they're really accelerating. So you need to weigh up now that those extra sales from being in the growth stage of the product lifecycle versus the cash. that you're having to spend now because you're trying to protect yourself from those new competitors thinking, I want some of those profits that's happening in that growing industry. Well, that might leave you in a situation where you are cash neutral because you've got big cash outflows, but you're getting no sales because you're in the growth stage. In terms of analysis, well, you're in a market that is growing quickly and you have a huge market share in it. And you know there's that threat of potential competitors that could enter the market. So at the moment, effectively, you are. trying to make as much money as you can before the competitors arrive. And you might try some form of price skimming if you are a star. Now, if you're a star and the market has saturated, and what I mean by that, that the market growth has slowed down, then you would hope that you still, because of all that marketing, have a high market share, but you're now in a market that is growing slower. So therefore, you might have turned from a star to a cash cow. And that's ultimately where you want to be. You want to be a cash cow. Let's look at it. So the situation of a cash cow is you have a high market share, but you're in a market that is growing slowly. What's the impact of this? Well, if this is happening, it's likely you are going to have super, super high sales. Super, super high sales means you're going to have high profits and likely they're going to be consistent profits. So it's going to be really smooth on that cash flow analysis. So high profits. Well. Shareholders are going to be happy, happy days for them, because they're probably going to get a big slice of those profits, which is dividends. So they're going to hire dividends. So your hope is that you stay as a cash cow. You want to milk that cash cow for as long as possible. Milk the cow. Get to the product lifecycle. That's in the maturity stage of the product lifecycle, where you've maximized the sales, maximized the revenue you're going to get from that product. life in the product life cycle you want to stay in the maturity stage for as long as possible to maximize those sales and those revenues so extension strategies can be something you could do right now also you need to think about those shareholders well they're happy because they're getting their dividends but maybe in an annual general meeting an agm you want to say to them well guys well ladies look you're going to get high dividends but we want to do some investments and some innovation for the future so we've got our cash cows of the future, or for the immediate term, we can put some money into our question marks and our stars. So hopefully they will become the cash cows of the future. So you might want to do some research and development and use some of these consistent profits and basically give yourself a long-term game, not a short-term game, a myopic game is the word. Okay. Keep it long term. Result of all of this, well, you've got high sales, high profits, they're consistent. That's likely to lead to the fact you're going to have a positive cash situation, which is great for you. You're going to have great cash flow. If you fail to stay as a cash cow, then it's likely you'll move to the next phase of the Boston Matrix, which is known as a dog. So that's when you have a market that is not growing very quickly and you don't have much market share within that market. It's the most. unideal situation that you could be in, the unideal quadrant that you could be in. So the situation, low market share, low market growth, the impact of this, well, it's likely to lead to a negative sales trend. Don't be confused that it means you're actually always losing cash. It's not necessarily the situation, but it is that there's a negative sales trend. So you would hope that you can just basically extend the life of your product as long as possible to drag out the maximum amount of revenue as you can from these dogs. And that's like the product life cycle in the decline stage because you kind of drag out as many of those sales as you can before it's time to pack up and go or divest. So analysis on this, you'll want to do as many extension strategies as possible to just. keep it going, keep making those last few sales. So lots of rebranding, lots of repackaging, for example. Also, you might want to use a product, because this is in your product portfolio and you sell other products, you might use the product that's in the decline stage as a loss leader. So it gets people into your shop and maybe they're going to spend their money on your stars when you're doing your price skimming. That's possible. So that's like a bam, bam, a counterpunch you could do. come in and then we'll get you on the other one in terms of our profit margin. Three, you might think from a social perspective, well, you could do some break-even analysis on your dogs. And basically you've worked out, maybe not making you money, but they're not losing you money. You're breaking even, you're making the output that you need to make. So it's just keeping people in a job and that keeps you happy is one of your, maybe one of your objectives, for example. And number four. The big thing with dogs is you need to make that decision of when you need to pack up and leave the market, when you need to divest, when you need to leave. And that's probably going to be the point when your revenues are going to fall and they're going to be less than your total costs, unless you're using it for some sort of cheeky loss leader tactic. The final thing to think about is just some other evaluation within the Boston Matrix. So please remember that the Boston Matrix is just a decision making tool. It won't define it all for you. It just helps you make your decisions about your product portfolio, about that range of products that you sell. And the real big thing you want to be thinking about is that ultimately you want to get your product into the cash cow quadrant. But if you're thinking long term, so you're not thinking just this year, you're thinking forever in the long term future. You need to think about always getting the profits from the cash cows and investing them into question marks. And then hoping those question marks. become stars, and then they'll become your cash cows of the future. Also, you might do an analysis with the Boston Matrix on your product portfolio, and you might find out that of the 10 products you sell, nine of them are cash cows. While that seems great now in the short term, in the long term, that could be a concern because those nine cash cows, well, they could become dogs. So you need to start thinking, take those profits, invest them into question marks so you keep your long term game strong. I hope that helps with the Boston Matrix. Remember it's all about levels. Get that multiple choice right. Know this grid, know the axis, know the low and the high is. And after that, remember you can use analysis of other areas. You can relate to the product lifecycle and be aware that you're trying to start question marks, move to stars. move to cash cows and then hold it as long as possible in cash cow because you don't want to become a dog