The product portfolio
- The product portfolio will be made up of product lines. A product line is a group of products which are similar.
Market growth: How fast is the marker for the product growing? The market may be declining or may be expanding. Sales of a product in a fast expanding market have a better chance of growing than a product in a stagnant market.
Relative market share: How strong is the product within its market? Is it a market leader that other products follow? To measure this the market share if a product is compared with the strongest rival product.
- A star is product it’s high market growth and a relatively high market share.
- Stars are valuable to businesses.
- The product will be in a strong position in its market as it has a high market share and the business can take advantage of a fast-growing market.
- A star is already likely to be profitable as it has relatively high market share. But a business will need to invest in the product to cope with a growing market and growing sales.
- This could mean investing in new production facilities or promotion to fend off competition.
- Net cash flow may be nearly zero. This is because although profits will be high, bringing money in, investment spending will also be high, leading to outflows.
- A cash cow is a product with relatively high market share.
- It is therefore well positioned in the market and likely to be profitable.
- But the market it is in will have weak growth. So, there will be little chance of increasing sales and profits in the future.
- There will be little need for investment.
- Cash does have strong positive net cash flow.
- Money coming into the business from profits will not be taken out via investment.
- Question marks, sometimes known as problem children or wildcats, are products with a relatively low market share in a fast-growing market.
- This can be problem for a business because it is unclear what should be done with these products.
- If a product is performing weakly it is unlikely to be profitable. But as it is a fast-growing market, there is potential to turn into a star.
- Net cash flow is likely to be zero or negative.
- Weak relative market share means that it will not be profitable. But investment will be needed to cope with expanding sales in a fast-growing market.
- These are products with a relatively low market share in a market with low growth.
- Dogs have poor prospects for future sales and profits.
- They may generate some positive net cash flow because they will need little investment but may earn some profit. But if they make little or no profit, net cash flow may be Zero or even negative.