| The Boston Square is one of the earliest examples of a
qualitative technique for analysing a portfolio of products and factors
affecting the pros and cons of a proposed course of action. It is based
on a product life-cycle and the coincidence of high market share with high
profitability.
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| Strategic planning is the systematic and
comprehensive analysis needed to develop an action plan for a business. |
| When integrated with processes for strategic thinking (to
identify possible ways a business could evolve) and effective management
of change (to counter unplanned threats and exploit unplanned
opportunities), it establishes an enterprise's strategy |
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The product life-cycle assumes that the cost of a unit drops as the volume
of units produced increases as a result of improvements in the production
process and economies of scale.
Thus a typical product develops from concept to market acceptance - through
a period of high demand and eventual market decline. Obviously not all products
follow the same cycle - some never reach the market. Other products have a
radically different duration for each stage of the life cycle: Some can go
through the whole cycle in a year or less whilst the demand for other products
endures for decades.
Converting the four stages of the product life-cycle to a matrix which plots
market growth against market share results in the "Boston
Square" shown above. The characteristic names given to the four cells
of the square are part of the reason for the successful adoption of the Boston
Square technique.
| The 'Stars' are those
products with the best profit and potential - but they may also require hefty
investment to become established as market leaders. New variants with high
value-added features generate growth in market share. The
'Cash Cows' are established products which generate cash with minimal
investment - cosmetic changes rather than new variants are used to maintain
market share against competitors using similar tactics to extend the period of
cash generations for as long as possible.
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'Wild Cats' are those
products which demand high investment for little return - i.e. where market
growth is high but market share is low. These products are initially funded by
income from Cash Cows - until they either become the next generation of Stars
(and eventually Cash Cows), or are abandoned in favour of more promising Wild
Cats. The 'Dogs' are those obsolescent products
which no longer merit further investment as the market share has been eroded by
new developments or fashions.
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| The Boston Square model highlights that the strategic management of a
product (or indeed a whole industry) needs to focus beyond internal factors to
consider market pressures. It also stresses the need to re-invest income to
provide long-term sources of revenue. |
