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Product portfolio's and the Boston Matrix
Why businesses have more than one product
Most businesses sell more than one product. Often they will produce several
similar products that appeal to different customers. A collection of such
products is known as a "product group" or "product range".
Good examples of product groups include:
Dell's range of desktop and laptop computers
Sony's range of DVD players and televisions
There are several advantages to having a product range rather than just one
Spread the risk a decline in one product may be offset by sales of other
Selling a single product may not generate enough returns for the business (e.g.
the market segment may be too small to earn a living)
A range can be sold to different segments of the market e.g. family holidays
and activity holidays
However a greater range of products can mean that the marketing resources
(e.g. personnel and cash) are spread more thinly.
Managing the product portfolio
A business with a range of products has a portfolio of products. However,
owning a product portfolio often poses a problem for a business. It must
decide how to allocate investment (e.g. in product development, promotion)
across the portfolio. Which products should it focus on?
A portfolio of products can be analysed using the Boston Group Consulting
Matrix. This categorises the products into one of four different areas, based
Market share does the product being sold have a low or high market share?
Market growth are the numbers of potential customers in the market
growing or not
How does the Boston Matrix work? The four categories can be described as
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Stars are high growth products competing in markets where they are strong
compared with the competition. Often Stars need heavy investment to sustain
growth. Eventually growth will slow and, assuming they keep their market
share, Stars will become Cash Cows
Cash cows are low-growth products with a high market share. These are
mature, successful products with relatively little need for investment.…read more