New Products
Business: Edexcel IGCSE, topic 4.3.7
Product Portfolio
A product portfolio is the full range of products and services that a company offers. Having a wide range of products can be good for a business, but it can make it harder to make business decisions.
Complexity
- Deciding which products or services to invest in can become more difficult and maintaining all the products or services can be difficult.
- In 2009, General Motors went bankrupt. it was offering 9 different brands of cars in a price range between $20,000 and $30,000. Toyota was only offering two.
- It would have been harder to make (manufacture) all these different cars and it probably made business decisions more difficult.
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).
Stars
- Stars are products (or services) in a portfolio that have a high market share in a fast growing market.
Cash Cows
- Cash Cows are products (or services) with a high market share in a slow growing market.
Problem Children (or question marks)
- Question marks or problem children are products (or services) with a low market share in a fast growing market.
Dogs
- Dogs are products (or services) with a low market share in a slow growing market.
Using 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. Profit from stars can be used to invest in marketing for products that are problem children. This can help problem children to become stars.
Test yourself on New Products
How many different car brands was GM selling for between $20,000 and $30,000 when it went bankrupt in 2009?
How many fewer car brands was Toyota selling relative to GM for between $20,000 and $30,000 in 2009?
What can building and selling lots of products do?
What are the 4 segments of the Boston Matrix?
Which of these is a business/product with a low market share in a fast growing market?