Using the Boston Matrix at Brand Level
As part of the management team, you may be involved in strategy discussions where you are asked to contribute and comment on the categorization of your products or services in terms of the Boston Matrix.
Understanding the terminology is essential but you also need to be aware of the shortcomings of this technique.
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The Boston Matrix is most often used to make the following decisions about products, services, or business units.
1. How best to manage individual products within a complete range taking into account the market conditions.
2. How to use successful and profitable products to fund the development of future products.
By using the matrix to bring perspective to decisions about which products or business units to invest in, organizations can optimize the distribution of funds across business units or product ranges. It will also highlight those areas they need to divest themselves of to meet profitability and growth targets.
The Boston Matrix has generated a lot of controversy since its introduction in 1970. It was originally intended to help organizations allocate resources between their different categories of business. However, financial capital is more freely available now than it was in the 1970s and the allocation of scarce capital is now less of an issue than it was then.
The important thing is that the model was originally developed to allocate capital across operating companies or divisions; it was never designed to be used at the brand level. This use (or abuse, as some would say) of the Boston Matrix can create self-fulfilling prophesies because some people see it as implied in the model that a Cash Cow will eventually become a Dog, and that that this is in some way inevitable or even desirable. In fact, a brand that was once a Cash Cow can be reinvigorated by an inspired marketing effort or product redesign.
A good example of this would be the acquisition and relaunch of the Mini brand by BMW, or the relaunch of Heinz Tomato Ketchup in its revolutionary upside-down bottle. Some critics of the Boston Matrix say that it implicitly denies that brands can be transformed, when in fact that is very often the best strategy. This undervaluing of a brand makes no sense because brands often represent assets of real value to an organization.
Despite the controversy surrounding it, the Boston Matrix can be a valuable tool provided that you are aware of its shortcomings.
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You may also be interested in: Introduction to the Boston Matrix, Classifying Products and Business Units, Stars, Question Marks, Cash Cows, Dogs, Using the Boston Matrix at Brand Level, A Balanced Portfolio and Advantages and Disadvantages.
