Strategic Analysis and Planning with MATRIX V5
Tutorial Step 12 - The Boston Matrix

The Boston Matrix is one of a number of classical concepts of strategy addressed by MATRIX V5, the software application for business strategists. The Matrix takes its name from the Boston Consulting Group who developed the concept during the 1970’s. Despite much criticism, the Matrix has stood the test of time and gained wide acceptance as a useful strategic concept. Shown to the right is a typical 'Textbook' representation of the Boston Matrix. Each numbered 'bubble' is a business opportunity.

The theory underlying the Boston Matrix is the Product Life Cycle concept, which states that business opportunities move through 'life-cycle' phases of introduction, growth, maturity and decline. They are cash poor at the beginning of their lives and require significant investment until they achieve widespread market acceptance. Meanwhile, mature business opportunities should generate a surplus of cash.

In general terms, a business opportunity will start out as a 'Question Mark', i.e. the host company has a low market share and spends a great deal of cash establishing its-self as a lead player. The opportunity will then move anticlockwise around the matrix through 'Star', and ultimately to 'Cash Cow' status by which time the host company should be dominant and seeing a significant return for its efforts! The host company may ultimately loose market share as new competitors enter the market with lower cost (or better) alternatives, in which case the Product / Market opportunity relegates to a 'Dog' status. More Information.

The Boston Matrix And MATRIX V5

Below - An example of the Boston Matrix produced by MATRIX V5.

1. Each ‘bubble’ represents a Niche. The colour of the bubble matches the colour of the Niche in the Segmentation Matrix.
2. The (horizontal) X-Axis is defined as ‘Relative Market Share’ which is plotted on a reversed og scale, set by default to the range 10x to 0.1x.
3. The (vertical) Y-Axis is defined as ‘Market Growth Rate’ which is plotted on a conventional scale, set by default to the range -30% to +30%.
4. The diameter of each ‘bubble’ in the matrix is directly proportional to the Volume or Revenue accruing to the Niche. Corresponding data was entered via the Market History And Forecast Data Editor.

A 'key' can be revealed on the left-hand side of the chart by clicking and dragging the chart edge. 'Hotspots', accessed by moving the cursor over the matrix provide on-screen information about the Niche, Growth, Share and other relevant information. The matrix can also be copied and pasted into a compatible graphics or presentation package by means of the Right-Hand Mouse Click / 'Copy to Clipboard' function.

The 'Select Boston Matrix' Dialogue

MATRIX V5 is an 'expert user' software tool and provides great flexibility when plotting the Boston Matrix. Tabs on the 'Select Boston Matrix' dialogue give the user choice in the format and detail of the plot.

To open the 'Select Boston Matrix' dialogue, click the 'Boston Matrix' button (above) which is located upon the toolbar.

To display the Boston Matrix shown earlier, the following settings are required within the ‘Select Boston Matrix’ Dialogue:

1. Plot: Select ‘Summary’
2. Scope: Select ‘HandyMan PLC’. Tick the ‘Use Niche Colours’ Tick Box
3. Data: Select ‘Revenue’
4. Sum: Select ‘Niche’
5. Time: Drop Down Start Year ‘2008’ and End Year ‘2010’
6. X-Axis: Select ‘Normal Log Scale (0.1x to 10x Biggest Competitor) and tick the ‘View X-Axis Scale’ Tick Box
7. Y-Axis: Select the ‘Fixed Growth Scale (+ / - 100%), set the ‘Offset Y-Axis Norm by (%)’ Text Box to ‘20’ and tick the ‘View Y-Axis Scale’ Tick Box
8. Also, tick the ‘View Key’ Tick Box

Clicking the ‘Plot’ button now reveals the required example.

The Tabs In Detail ...

1.Type
Options include the following types of plot:

• Summary over the whole model timeframe.
• Step for each year.
• Movie, which automates the step for each year.

2.Scope
Options include plots for:

• Host company in All Niches , which shows the total distribution of business for the Host company.
• A Competitor for the Niches within which it competes .
• All Suppliers into the 'Active' Niche - i.e. the Niche currently in focus.

3. Data
Depending upon the options selected in File / Preferences (Input and Analysis), enables either Volume , or Revenue based analysis. Note that the area covered by each 'bubble', and indeed the co-ordinates of corresponding bubbles MAY be different for each plot.

4. Sum
Enables data to be summed by Niche, Product , Segment , Market , Scenario or Group.

5. X-Axis
Enables data to be plotted on the X-Axis as Reversed Log Scales spanning 10x to 0.1x (Default), or 100x to 0.01x (Expanded). The latter gives a wider perspective and includes those plots where the Host is supremely dominant / subservient.

6. Y-Axis
Enables data to be plotted on a Contracted Y-Axis Scale (spanning +/-3% or +/-10%), the Default Y-Axis Scale (spanning +/-30%) or an Expanded Y-Axis Scale (spanning +/-100%, +/-300% or +/-1000%). Note it is also possible to 'offset' the Y-Axis plot by a 'user defined' percentage. This percentage could equate to the required growth rate for the business, so any opportunity falling above the horizontal datum line could be considered either a 'Question Mark' or a 'Star' and any opportunity falling below the horizontal datum line could be considered either a 'Cash Cow' or a 'Dog'. Below left shows the plot with the horizontal datum line set at 0%; below right shows the horizontal datum line set at 10%. The latter clarifies which quadrant each opportunity lies within.

Using the 'Forwards' (>) and 'Backwards' (<) Buttons to show a Trend
If a 'Step' plot has been chosen in tab 1, use the 'Forwards' (>) and 'Backwards' (<) buttons to show the 'Year on Year' trend. Note that equivalent opportunities (in this instance, Niches) are linked by connecting arrows.

The 'Movie' button (>>)
A similar plot is animated by selecting the Movie (>>) button.

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