PRODUCT PORTFOLIO Flashcards
What is a product portfolio?
A business with a range of products
What is a disadvantage of having a large product portfolio?
Decison making is more complex and it can be difficult in maintaing all of the products
What is the Boston Matrix?
The Boston matrix is a way for firms to analyse their product portfolios. It organises products into 4 categories based on two features - market share (% of market sales) and market growth (how fast the market is growing).
Name the 4 categories in the Boston Matrix
- Stars
- Cash Cow
- Question marks
- Dogs
Explain the Stars category?
Stars are products (or services) in a portfolio that have a high market share in a fast growing market.
Explain the Cash Cow category?
Cash Cows are products (or services) with a high market share in a slow growing market.
Explain the Question Mark category?
Question marks or problem children are products (or services) with a low market share in a fast growing market.
Explain the Dogs category?
Dogs are products (or services) with a low market share in a slow growing market.
How do businesses use the Boston Matrix?
- Businesses usually want to have a diversified portfolio because it means not all of their eggs are in one basket, and this reduces risk.
- However, if all of your products are Stars or Cash Cows, that may be a good thing.
- It can help allocate investment. You can use profits from stars to invest in dogs
Benefits of developing new products?
- Lower risk
Having lots of options reduces the overall risk of a business.
If a business invested all of their finance into aeroplanes and then someone invents teleportation, then their whole business would fail. Investing in restaurants would diversify the business.
Risks of developing new products
- It can damage the brand
- If a new product or service fails, it is likely that a business will lose all of its investment (money spent on the project).
