The Boston Matrix

Question 1

Question Marks (5)

Answer 1

1. Question mark has low sales but potential for high market growth
2. It will need significant investment into R&D / Market Research
3. And promotion to raise awareness
4. Reduced Cash Reserves as no inflows in the development stage and low inflows in the intro stage
5. Link to Liquidity

Question 2

Stars (5)

Answer 2

1. High Sales & High Market Growth
2. Sales will increase
3. Business will make better use of their production capacity
4. Improves capacity utilisation spreading the fixed cost over more units
5. Lower unit FC

Question 3

Dogs (2)

Answer 3

1. Dogs have low sales & low market growth
2. Less cash inflows from sales + link to Liquidity

Question 4

However, Dog Stage (7)

Answer 4

1. Dog products have a low market share & low market growth
2. May be that products require very little
   promotion and R&D
3. Unit cost is very low
4. Business maintains a profit margin and can retain
5. To be used for Question mark products
6. To ensure potential for a cash cow or future star
7. Product portfolio remains balanced and spread risk

Question 5

Dogs - Sources of finance (5)

Answer 5

1. Dog products may be lower in profitability
2. Low sales means low output
3. Low capacity utilisation spreading
4. Fixed cost spread over less units
5. High unit FC

Question 6

Cash Cows (3)

Answer 6

1. Cash Cows have high sales but low market growth
2. High sales will mean sales volume it’s at its peak - achieving EOS
3. Unit costs will fall

Question 7

Boston Matrix - Benefit (5)

Answer 7

1. If a business has products on each stage of the product life cycle
2. They have a balanced product portfolio
3. As they have spread risk
4. Aren’t Vulnerable to a change in trends
5. Link to Yellow Sheet (Liquidity)

Question 8

Boston Matrix - Drawback (5)

Answer 8

1. Maintaining a balanced product portfolio
2. Will require significant investment in all marketing activities like R&D market research and promotion
3. The business will require significant cash reserves
4. May seek additional sources of finance
5. Link to relevant source of finance drawback