Portfolio Analysis (Edexcel IGCSE Business)

Revision Note

Written by: Lisa Eades

Reviewed by: Steve Vorster

Boston Matrix

The Boston Matrix is a tool used by businesses to analyse their product portfolio and make strategic decisions about each product
The matrix 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

1-3-5-the-boston-matrix-and-the-product-life-cycle

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

Product Type	Explanation	Implications
Cash Cow	Cash cows are products with a high market share in a mature market (the entire market is no longer growing)	They generate significant positive cash flow but have low growth potential They need minimal investment as they are seen as stable sources of income Marketing efforts focus on maintaining their market share and profitability Cash cows are valuable assets and can be used to fund the development of new products
Problem Child/Question Mark	Problem child or question mark products have a low market share in a high-growth market These products have the potential to become stars if the company invests in their development	There is often a negative cash flow as businesses usually invest in problem child products to increase their market share and turn them into stars Marketing efforts focus on increasing their market share and brand recognition
Star	Star products have a high market share in a high-growth market The company typically invests in stars to maintain or increase their market share	They generate significant positive cash flow and have the potential for continued growth Marketing efforts focus on building brand recognition and increasing market share Stars are valuable assets and the business should focus on maximising their potential
Dog	Dog products have a low market share in a low-growth market	They generate little revenue for the company and have no growth potential Businesses often move away (divest) from these to focus on more profitable products Marketing efforts for dog products are minimal or zero

Examiner Tips and Tricks

You need to know the purpose of the Boston Matrix and the characteristics of the four different types of product

In the exam you may be asked to identify elements or their characteristics

Last updated: 11 October 2024

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