Exam (elaborations)
Boston Matrix
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An example of how to approach a exam question on a boston matrix using a past paper example.
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By: montykaren • 3 year ago
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Boston Matrix - Essay QuestionA major advantage for Company X is that this matrix allows the businesses product portfolio to be
placed into each of the four categories, stars, question marks, cash cows and dogs. This provides
Company X with insight into where there products are placed which means they can examine where
the products currently sit and this ensures that the business can react if they don't have a balance of
products. This can help the company guarantee that they don't have too many products in the dog
or question mark sector in which the product in the dog stage is experiencing a fall in sales or too
many question marks where the product could go either way. Overall, this helps the business keep a
balance and ensures that there are products such as cash cows that can support investment for
other question marks.
However, as the business carries this out they will have to rely upon the manager making the
decision on where a product is placed which could possibly be bias which can impact decision
making, as to significantly impact company performance, business decisions must be based on
reliable, relevant and comparable data. If this is not provided then it can lead to the wrong decisions
being made such as a product being placed in the dogs sector when it could be placed in cash cows
and the business may decide to divest the product leading to a profitable opportunity being missed.
Another advantage of this that the business will be able to analysis the financial situation of each
product is specific sector and make appropriate business decisions based upon this such as the cash
cows which are cash generating and they can decide to use the money generated from this to help
ensure sustainable investment for the question marks and can help the business decide whether or
not to divest the products placed in the dog stage due to the possibility of a loss being made due to
this product being in the decline stage of the product life cycle. This means the business can make an
accurate business decision on the future of their product portfolio based on this financial data.
However, the Boston Matrix model itself provides little or no quantitative figures and this means
there is little or no predictive value and the business will have to research this information
themselves. This can take time and due to the matrix only being a snapshot of the products current
position this might go out of date when the research is carried out such as a star becoming a dog
meaning the research was a waste of time, money and business resources.
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