Product Portfolios (AQA GCSE Business)

New Product Development

• A product portfolio is the range of products or services offered by a business

• One way to grow the product portfolio and stay ahead of the competition is by developing new products and innovating existing ones

• The process of new product development involves a number of important stages:

Diagram: the product development process

New product development is a lengthy process that typically involves generating ideas, developing prototypes and conducting test launches prior to the full launch 

1. Generate ideas

• New product concepts are discussed and brainstormed using customer suggestions, ideas from competitors’ products, employees’ ideas and information collected through market and technical research 

2. Select the best idea

• Ideas are weighed up with some dropped and others chosen for further research

• This decision relates closely to costs and likely demand

• Research includes looking into forecast sales, size of market share, and cost-benefit analysis for each product idea

3. Develop a prototype

• This is an early version of the actual product

• This allows the operations department to see how the product can be manufactured, any problems or difficulties arising from its production and how to fix them

• Computer simulations are often used to produce 3D prototypes on screen

4. Test launch

• The developed product is sold to on a small scale to a limited market to see how well it sells before its full launch

• Changes may be needed prior to an expensive, large scale launch

• Digital products like apps and software run beta versions, which is a method of test-launching

5. Full product launch

• The finalised version of the product is launched to the entire target market

Costs and Benefits of New Product Development

The Boston Matrix

• The Boston Matrix is a tool used by businesses to analyse their product portfolio 

  • The model can help managers make strategic decisions about each product within the portfolio

• It classifies products into four categories based on their market share and the market growth rate

  • Cash Cow

  • Problem Child/Question Mark

  • Star

  • Dog

• The Boston Matrix helps businesses have a balanced product portfolio

  • Profitable cash cows fund the development of problem children and ensure stars receive the investment they require to maintain their market leader position

  • Unprofitable dogs are divested to increase focus and funding on products with more potential

Diagram: the boston matrix

The classification of products in the Boston Matrix according to their market share and the growth rate in the market as a whole

• By categorising products into these categories, businesses can allocate resources more effectively, improve their cash flow and develop marketing strategies that align with the product's potential

The Four Types of Product in the Boston Matrix