Boston matrix focuses on the analysis the balance a company’s product portfolio where two fundamental factors are used in the determination of a commodity’s strategic position, within a certain market. These factors are the comparative market share and market growth rate. In Boston matrix, certain factors makes the products and services become cash users, cash neutral or cash generators while companies may continue offering their product or service despite being at the declined stage of its life cycle.
The left-upper quadrant is composed of stars, which are commodities with a high market share while functioning in high-growth markets. This implies that heavy investment is required thus making the venture a cash user. Nevertheless, the assumption is that the companies will enjoy economies of scale and generate hue returns owing to the high market shares. Therefore, the assertion under such conditions is that the venture or commodity will become cash neutral.
Cash cow demonstrates high market share coupled with consumer loyalty. In this quadrant, the sales are elevated, and little marketing support is required as customers are well aware of the commodity. High sales offer the company economies of scale, which translates into relatively low unit costs. Consequently, the profits margins are higher, which makes the commodity a cash generator.
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A company may continue offering a certain service or product even after reaching the decline stage since loyal customers still exist to purchase the commodity. Additionally, the commodity may not have high market share, but it possesses a considerable share compared to its competitors. Decline stage may come up due to fashion change and once the fashion trend ends, consumers of its products can still continue enjoying its products or services. The company bears clear advantage even at decline stage since the availability of the new products may still be limited to certain geographical locations.