Product Life Cycle & BCG Matrix

Question 1

What are the 4 stages of the Product Life Cycle (PLC)?

Answer 1

1. Introduction
2. Growth
3. Maturity
4. Decline

Question 2

Give details about the “introduction” phase of the PLC (4 points)?

Answer 2

• Sales slowly build
• Profit negative due to R&D / setup costs
• Priority is to build awareness
• High failure rate

Question 3

Describe the “growth” phase of the PLC (4 points)…

Answer 3

• Sales increase
• Monopoly window
• Priority is tobuild the brand
• Need to think about “potential product” for when competitors enter the marke

Question 4

Describe the “maturity” phase of the PLC (4 points)..

Answer 4

• Sales level out
• Competitors well established
• Risk of product becoming oudated, may need refreshing
• May need to target a different market

Question 5

What happens in the “decline” phase of the PLC (2 points)?

What options does the firm have (3 points)?

Answer 5

• Profits and sales fall
• Substitutes may be the cause of declining sales

Firm can…

• Maximise returns while possible
• Sell the rights to the product
• Withdraw the product

Question 6

What is the Boston Consulting Group (BCG) Matrix (3 points)?

Answer 6

Formed in 1968

A tool for firms to analyse their product line

Offers a snapshot a products current position in the market

Question 7

What is the difference between a product line and a product range?

Answer 7

Line: group of related products that targets a particular segment of the market e.g. pasta & sauces. Lynx shower gel & body spray

Range: Portfolio of products sold by a company e.g. Mars sells chocolate and pet food

Question 8

What are the 4 product classifications in the BCG Matrix?

Answer 8

Star

Question Mark (Problem Child)

Cash Cow

Dog

Question 9

Give 5 characteristics of a “Star”?

Answer 9

• Rapid growth
• Dominates market share
• Requires high investment
• High profits
• Still has potential to grow

Question 10

Give 3 characteristics of a “Question Mark”?

Answer 10

• Rapid growth
• Low market share (company doing something wrong OR product is new)
• Requires high investment

Question 11

Give 4 characteristics of a “Cash Cow”?

Answer 11

• Low growth
• High market share
• Little investment required (well established)
• Still very profitable

Question 12

Give 4 characteristics of a “Dog”?

Answer 12

• Low growth
• Low market share
• Product in decline - little investment
• Small/negative profits

Question 13

What is Ansoff’s Growth Strategies Matrix?

Answer 13

A strategic planning tool for a company to determine strategies for growth

Question 14

What are the 4 suggested marketing strategies in Ansoffs growth matrix?

Answer 14

Market Penetration

Product Development

Market Development

Diversification

Question 15

Describe the “market penetration” strategy?

Answer 15

• Undercutting price/increasing promotional base of already established products
• Low risk

Question 16

What is the “Product Development” strategy?

Answer 16

• Develop new products, introduce them into existing markets
• Product directly competes with existing competitors. Must outperform them.
• Medium risk

Question 17

Describe the “Market development” strategy?

Answer 17

• New market found for existing produce
• New segments -> market research required
• Medium risk

Question 18

What is the “Diversification” strategy?

Answer 18

• New product, new market
• Product not necessarily in line with companies existing competencies (E.g. Virgin)
• High risk