The Boston Matrix

Focusing Effort to Give the Greatest Returns

(Also known as The BCG Matrix, the Growth-Share Matrix and Portfolio Analysis)

Milk your "cash cows."

© iStockphoto/beckariuz

Imagine that you're reviewing your organization's products.

You need to decide which ones you should focus investment on.

One of the products is doing well financially.

However, demand has fallen, and this trend looks set to continue.

Another product is also doing well, but it's in a new market, and needs a lot of cash to support it. Should you continue investing in it?

And another product is barely profitable, although its market is growing. Should you kill it or keep it?

To make these decisions, you need to look beyond the income that the products are currently bringing in. You need to assess how they're likely to perform in future.

The Boston Matrix, also called The Boston Consulting Group (BCG) Matrix, is a simple, visual way to examine the likely financial performance of your product or business portfolio.

In this article, we'll look at the Boston Matrix and how to use it. We'll also outline some of its limitations.

Understanding the Boston Matrix

Management consultants at the Boston Consulting Group developed their matrix in the early 1970s. They designed it to help managers at large corporations decide which business units they should invest in.

However, managers in all kinds of organizations now also use it to decide which of their product lines or products to invest in, and which to dispose of or to shut down.

The matrix, shown in figure 1, places products into four categories based on their market share and market growth.

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