3.4c - Product (Boston Matrix)

Question 1

Product portfolio definition

Answer 1

The range of products or brands provided by a business

Question 2

Boston Matrix definition

Answer 2

A tool of portfolio analysis that classifies products according to the market share of the product and the rate of growth of the product’s market

Question 3

Features of ‘stars’:

Answer 3

• High share of a rapidly growing market
• Neutral or at best modestly positive cash flow
• Profits are used to support other products

Question 4

Strategy for ‘stars’:

Answer 4

• Invest to sustain growth
• Continue to build sales
• Spend to keep competitors at bay

Question 5

Features of ‘cash cows’:

Answer 5

• High share of a slowly growing market
• At the mature stage in the product life cycle
• Dominant share but little potential for growth
• Large positive cash flow so can support other products

Question 6

Strategy for ‘cash cows’:

Answer 6

• Defend market share
• Aim for short-term profits
• Little need for investments

Question 7

Features of ‘question marks’:

Answer 7

• Low share of a rapidly growing market
• Negative cash flow
• Has potential but future is uncertain

Question 8

Strategy for ‘question marks’:

Answer 8

• Invest to increase market share

- Invest in promotion

Question 9

Features of ‘dogs’:

Answer 9

• Low share of a slowly growing market
• No potential
• Either failed products or products in the decline phase
• Uses up more time and resources than can be justified

Question 10

Strategy for ‘dogs’:

Answer 10

• Phase out

- Only investment is reinvesting profit made to maintain market share

Question 11

Disadvantages of the Boston Matrix:

Answer 11

• Only a snapshot
• Little predictive value
• Market growth is an inadequate measure of a market’s attractiveness
• Ignores other qualitative factors
• Product life cycle varies

Question 12

What are the different classifications in the Boston Matrix?

Answer 12

• Stars
• Cash cows
• Question marks
• Dogs