The Boston Box, also known as Growth-Share-Matrix

The Boston Box is a well-known tool for corporate portfolio management. It is striking for its simplicity. All information needed is easily obtainable and the conclusions are straightforward. However, it is exactly this simplicity that makes the Boston Box – or Growth-Share-Matrix – a false friend.
This article explains the theory, discusses strategies to be derived, and gives advice on practical application, problems and the models relevance today

Key Takeaways for the busy reader

The Boston Box is a tool for portfolio management. The idea is to develop a balanced portfolio of products or business units that either generate or consume cash. The Boston Box – or Growth-Share-Matrix – was named after the Boston Consulting Group, since it was developed by BCG’s founder, Bruce D. Henderson and his colleagues.

(all quotas from Henderson in this post are taken from The Boston Consulting Group on Strategy: Classic Concepts and New Perspectives)

The tool clusters products or business units by two characteristics:

  • Their relative market share (horizontal axis) and
  • The growth of their markets (vertical axis)
The Boston Box or Growth-Share-Matrix: Four boxes according to relative market share and market growth

The Boston Box or Growth-Share-Matrix

The four clusters indicate how valuable a product is now (market share) and in future (market growth). This, in turn, indicates a products ability to generate cash or their need for cash. In Henderson’s terms, cash generation is the ultimate measure of success for any product or business unit.

Norm strategies can be derived for all four clusters.

  • The best known strategy derived from the Boston box probably is that the cash generated from Cash Cows should be invested into the Question Marks in order to increase their relative market share.
  • Dogs should be abandoned, of course.

However, we have to remember the historical context of this management model. It dates back to the early 70s – at time when external conditions were fairly stable and growth was the objective. In order to achieve valid results under the current economic conditions, we have to think a step further.

The Boston Box described – The theory

Idea and historical context

The Boston Box model was developed in the early 70s of the 20th century. That was the time of expansion strategies and portfolio management. External conditions were fairly stable, compared to our times. Innovation cycles and economic cycles were much longer; even competitors’ moves were predictable to some extent. Businesses were focused at stable growth.

Under these conditions, businesses needed a tool that enabled them to find the optimal composition of their product portfolio. The objective was a balanced mix of products or activities in different phases of their lifecycle with different levels of cash generation or absorption.

As Henderson wrote in 1970

To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High-growth products require cash input to grow. Low-growth products should generate excess cash. Both kinds are needed simultaneously.

With this in mind, the Boston Box has the objective to help corporations to decide in which businesses or products to invest.

It is essential to understand this historic context. The tool will provide the best results only under similar conditions. In today’s dynamic environment, findings from a Boston Box analysis have to be used with caution.

The axes

Relative market share – The horizontal axis

The horizontal axis is named market share. The higher the share, the more to the left a product is positioned.

The Boston Box, which is also called Growth-share-matrix, actually uses the relative market share:

Relative market share =
the product’s market share / the largest competitor’s market share

The idea here is that the absolute market share (i.e. the products share from the total market volume) does not say much about its competitive positon. For example:

  • Product A: An absolute market share of 20% is excellent, when the there are many competitors and none of them has more than 10% market share.
  • Product B: An absolute market share of 20% is weak, when there is a competitor with 70% market share.

Referring to absolute market share, both products would have the same position on the horizontal axis. In comparison, product A has a relative market share of 200%, which surely makes it a star or a cash cow. Product B’s relative market share is 29%, which makes it a dog or a question mark at best.

It becomes clear that product A is in a much better position to generate cash. It has a dominant market positon and thus can better

  • Realize economies of scale
  • Determine market conditions, such as service and price levels
  • Use its positon of strength to attack weaker competitors

In theory, product B would need substantial investment (i.e. cash) to increase its market share to a profitable level.

Hence, market share serves as a measure for the ability to generate cash and thus for the current value of the product

Market growth – The vertical axis

The market growth rate is shown on the vertical axis.

In this model, a high market growth rate implies a high need for cash: Products in growing markets (almost) always need cash in order to grow or at least maintain their market share.

Henderson states that …

… (A product with a large enough share) will become a cash generator when the growth slows and its reinvestment requirements diminish.

… growth requires cash input to finance added assets. The added cash required to hold share is a function of growth rates.

This implies that cash can only be generated once the growth stops.

Growth is never infinite. No market can grow forever. Hence, the relative market share that is achieved during the phase of market growth positions the product to become a cash cow or a dog when market growth slows down. Thus, market growth indicates the future value of a product.

Summary – Meaning of the axes

Relative market share Market growth
Horizontal axis Vertical axis
Ability to generate cash Need for cash
Current value of the product Future value of the product

The Boxes

Stars (High market share, high market growth)

Stars are integral parts of every balanced product portfolio. Their markets are attractive, since they provide potential for further growth. In these markets, stars already have an excellent position, compared to competitors. Their value for the company as a whole lies in their potential to become cash generating cash cows as soon as the market growth slows down.

Until then, stars may or may not generate excess cash. The short term objective for stars is to maintain or even increase their relative market share. In most situations, this requires substantial investments:

  • To adjust capacities for the growing market volume and demand
  • To keep competitors at a distance

Question marks (Low market share, high market growth)

Their growing market is promising. Yet, the product is in a weak position to capitalize on these prospects. To increase market share requires the product to grow above the market growth rate. In doing so it has to attack competing products that will defend their stronger position.

This growth requires substantial investments and thus cash.

If the Question mark fails to move towards the Stars-section by increasing its relative share, it risks slipping to the Dog-box, once market growth slows down.

Cash cows (High market share, low market growth)

As the name indicates, Cash cows generate the cash to be invested elsewhere in the company. Their high share in a stable market provides a secure position, which can be maintained without major investments.

A substantial risk for Cash cows is the fact that mature markets beyond their growth phase may move on to a stage of decline. As soon as the overall market volume significantly decreases, the products ability to generate cash will be harmed, despite its strong position.

Dogs (Low market share, low growth market)

Henderson considers Dogs – or Pets in his terminology – as products without positive cash flow. He states that

… the profit must be reinvested to maintain share, leaving no cash throw-off.
The product is essentially worthless, except in liquidation.

This reminds me of the famous Jack Welch quote “Fix it, sell it, or close it”. Henderson implicitly assumes that fixing is not an option for Dogs, since the low market growth does not provide sufficient future prospects. This, in turn, implies that the product or market is coming towards the end of its lifecycle.

This is one option to deal with a Dog business. However, there are other situations and other options. It is not advisable to abandon a Dog without a deeper analysis of the situation. Alternative strategies will be discussed in more detail below.

Strategic implications from the Boston Box

Norm strategies

There are some norm strategies that are typically mentioned in the context of the Boston Box model.

Norm strategies are for norm situations. However, business life does not follow norms. Click To Tweet

They all go back to Henderson’s original article from 1970 – as well as the well-known image with the arrows, indicating how the cash should flow and how the products will move:

Norm strategies from the Boston Box: Where should the cash flow? How should products move?

Norm strategies from the Boston Box: Flow of cash and movement of Products

(adapted from Henderson, 1970)

The basic idea is that the cash generated from Cash cows (and maybe some dogs) should not be reinvested in these products. This is a harvesting strategy. Instead, this cash is to be invested in the Question marks in order to increase their market share and thus to transform them into stars. Cash can also be invested into Stars in order to defend their market share so they can become Cash cows once their markets’ growth slows down.

Alternative strategies

These norm strategies apply to norm situations. However, business life does not follow norms. There are always no-standard situations that require no-standard strategies. Before you blindly follow a norm strategy that pops out of your Boston Box analysis, do some out-of-the-norm thinking. Here are some examples:

Henderson recommends to get rid of the Pets or Dogs. He states that they are of no value for the business. One could at most pursue a harvesting strategy for as long as the Dog generates a moderate positive cash flow.

I can think of at least three strategies that give reason to keep a Dog alive:

  • The Dog can be a complementary product for another strategic product of the business. In this situation, customers value the profitable and cash generating main product only when it comes in a bundle with the Dog-product. Abandoning the dog would lead to a decrease in demand for the main product.
  • Some products eventually reach a state when the market decline comes to a stop and when all other competitors already left the market (pursuing norm strategies for their Dogs). Thus, the own Dog product would inevitably regain market share without significant investment. Here a so called Last-Iceman-Strategy could be an option. There always are a number of customers who stick to an outdated Product or technology. It can be highly profitable to sell to these laggards, once all there are no other competitors left.
  • Is the market already declining or just not longer growing? What do you think your competitors will do? Some markets / products have very long phases of maturity in which there is not much change in the market volume at all. Imagine all competitors will follow a Boston-Box norm strategy: They would all abandon their dog products, maybe except the market leader. Thus, your own product could take on their freed-up market share with only reasonable investment.

There are other reasons to go on with a Question Mark or a Dog, as long as they generate some cash, for example:

  • Second-Source-Strategy: In an almost monopolistic market, the product can be positioned as a second source. Many customers do not want to rely on just one single monopolistic supplier. Hence, they are willing to buy a proportion of their needs from a ‘second source’ for strategic reasons. In some cases, they are even willing to pay a moderate price premium, just to keep their second source in business.
  • Dogs and Question Marks can help to utilize existing capacities and thus to improve recovery of fixed costs. This applies to situations when the business cannot utilize all its capacities with more promising Stars or Cash Cows – be it permanently or due to fluctuations in demand.
  • There are products that are necessary to differentiate from competitors or to provide a value added customers expect (e.g. complementary products). Some products may never become profitable. They are, however, a necessary precondition for the success of other profitable products. Hence, they will be cross-subsidized from those products for ever.

Companies may plan a far-reaching restructuring of their product portfolio for overriding strategic reasons, e.g. refocussing the whole business. In this situation, it is a viable option to sell even Stars or Cash Cows that no longer fit the new strategic direction as a whole. The spin-off can generate a substantial inflow of cash, which can be invested in products that better fit the new business focus.

Practical application, problems and relevance of the Boston Box model today

The alternative strategies discussed above already indicate that the Growth-Share matrix does not provide simple solutions for complex strategic questions.

The Boston Box tool has a number of weak points. As long as you are aware of these, you can assess the viability of your results accordingly:

  • The tool delivers best results for stable environments. It is less suitable for very dynamic markets with a high degree of uncertainty, complexity and potential transformation.
  • The tool is relatively simplistic. All it does is to look at one element from each of the two parts of strategic analysis – internal and external analysis. It puts them on two axes and distinguishes high and low. (see Mintzberg, Ahlstrand und Lampel in “Strategy Safari”). All other factors impacting the competitive position are neglected.
  • The boundaries of the markets have to be defined with care. Competitions may not only come from other businesses’ similar offerings, but also from new technologies and substitutes.
  • The tool as described above is fairly static, looking at the current market share and market growth rate. Both may change quickly.
  • As mentioned above, the most obvious strategies may not always be the best ones. Of course, the ideal portfolio should contain some cash generators and some future stars that are to be nurtured with this cash. However, there are many other issues to consider.

Here are some issues to check before going with a norm strategy from an Boston Box analysis:

  • Make sure that you have defined your market correctly. Who are you really competing with?
  • Do not rely on current market share and market growth. How will they change in future?
  • Double-check if there are interdependencies between your products. How will a strategy shift for one product affect the other products in your portfolio?
  • Do not rely on just market share and market growth in your analysis. Double-check your results with a GE matrix (market attractiveness and business unit strength)

So what is the value a Boston Box analysis can add to your strategy process? Like most other models,

  • it is a starting point for further thinking as well as a helpful tool for visualization.
  • It helps to structure the ever-increasing amount of information
  • It facilitates understanding of the relationship between product lifecycles and market lifecycles
  • It allows to compare otherwise unrelated or incomparable products / business options by focusing on just two features.

One last advice: like the other management models and tools, the Boston Box is not a natural law. Feel free to adjust it to your needs. You may, for instance substitute market growth with a different measure of market attractiveness or profit potential that better fits your industry. Similarly, you may replace relative market share with different measure for the strength of your market positon, e.g. the degree of customer lock-in or network effects.

Management models and tools are not natural laws. Feel free to adjust it to your needs. Click To Tweet



  1. […] A stable Last Iceman product can provide the basis for various diversification initiatives. The corporation can afford to make some bets on upcoming technologies and markets, since they still have their core product as a cash generator and fallback solution. This would be a typical strategy derived from a Boston Box analysis. […]