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Advantages
- The Boston Matrix is particularly
beneficial to firms who are trying to manage a product portfolio as they must
ensure a balance between the number of products in each category and quadrant
of the matrix. Botanic Inns Ltd. has an extensive portfolio that includes pubs,
bar/restaurants, hotels and off -sales. In total it has
16 products
to manage.
- The Boston Matrix positions each product
on a grid thus allowing management to make key decisions at each stage
depending on Whether the product attracts a high or low percentage of market
Share or potential growth rates are high or low. Botanic Inns Ltd. has been
adding to its portfolio since the 1990s so
products
are
at various stages. For instance, The Botanic Inn is likely to be the firm’s
Cash cow while The King’s Head and bar Apartment are stars. Horatio Todd’s is
the latest addition so is therefore the problem child although winning an award
is a good indicator that it may prove successful.
- Using
the Boston Matrix helps management to identify the appropriate time for
launching new products onto the market. Management in Botanic Inns Ltd. would
have used revenue generated by the cash cows and stars to finance the opening
of Horatio Todd’s Bar/restaurant
- The
information provided by the Boston Matrix can indicate the Likely cash flow
position of each product within the context of its Market. Management in
Botanic Inns Ltd. may use this to inform Future decisions relating to closure
should any of the outlets no longer Perform at an acceptable level. Such a
product would be considered
as a dog in the matrix
- Simple business tool
- Highlights when remedial action is needed
- Visual tool/simple
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Disadvantages
- using
the Boston Matrix for decision making and managing the Product portfolio is no
guarantee of success for Botanic Inns Ltd.
- Critics
suggest that the analysis provided is too simplistic and does not reflect
economic reality. The Boston Matrix is a theoretical model only and therefore
cannot take account of all economic
activity
- The
hospitality environment is very volatile so making decisions based on the
predicted cash flows for each product in the portfolio can be risky
- Analysis can be affected by bias
- Ignores
qualitative data
- Relies
on expertise for analysis
- Difficult
for management to decide where to place each product.
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