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PRODUCT MANAGEMENT AND THE BOSTON MATRIX

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The strictly growth business must have a number of product lines if it is to remain in permanent growth. The Boston Matrix is, arguably, the most powerful product marketing tool available. This, together with the Product Life Cycle, provides the basis for managing the product range.

Classical economics is the science of demand and supply. These two marketing tools provide a means to manage demand and supply.

The Boston Matrix has four categories for products , or indeed entire businesses. It analyses these in terms of the market growth rate and the relative market share.

The Problem child where market growth is high but market share is low.

These may well have been new products which either failed to take off or were beaten to the market by competition. Market failures should be scrapped very quickly. Products beaten by competition at the early stages might remain for redevelopment and relaunch, but only if the business believes it is either an absolute essential or the odds on succeeding and catching up the successful competitor are high.

The Rising Star where market growth is high and market share is growing fast.

These successful new products must be supported extremely strongly in order to establish and retain a market lead and provide long term benefits from establishing the “first-in” position. These are likely to need strategic investment in the early stages using all the cash generated or even ahead of generation by using cash generated by other products in the portfolio.

The Cash Cow where market growth is low but market share high.

These are the rising stars of previous times and the business will wish to extend their life as long as possible through product development, branding and promotion. Investment needs to be strong but, in this case, always from cash generated.

Finally Dogs where both market growth and market share are low.

These could be a failed problem child or simply products which failed to win the competitive game. Dogs should be avoided if at all possible by early divestment, possibly to the winning businesses, or subjected to managed decline minimising the final impact on cash flow. A third approach is to build a “kennel” of dogs by acquiring other competitive products and thereby increasing market share to become a cash cow. The dream scenario would be to build on the skill base and reinvent the product line into an entirely new market opportunity and become a rising star.

I like to add a fifth category of test tube baby, which is products still in development.

The strictly growth business should have a number of these ready on the shelf for launch when market conditions are right. These may include second generation products used to extend the life of cash cows or entirely new products waiting for the right market conditions prior to launch.

STRICTLY GROWTH BUSINESS

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