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9609 · 3.3.3

Product portfolio analysis — practice questions

Practice and worked examples for 9609 Product portfolio analysis. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Food manufacturer data:

  • Brand A: 35% market share, market growing 8% p.a.
  • Brand B: 40% share, market growing 2%.
  • Brand C: 8% share, market growing 15%.

Classify each and suggest one portfolio action.

Show solution outline

Brand A — Star (high share + high growth): Invest in promotion and capacity to defend leadership.

Brand B — Cash cow (high share + low growth): Harvest cash — limit R&D/ad spend, maximise profit to fund Brand C.

Brand C — Question mark (low share + high growth): Invest selectively (distribution, promotion) to build share OR divest if cannot compete with larger rivals — case dependent.

Worked example 2

InnovateTech plc has a portfolio of three electronic products. The following data has been collected for the last financial year:

ProductInnovateTech's Annual SalesLargest Competitor's Annual SalesMarket Growth Rate
Smartwatch 'Chrono'$50 million$100 million15%
------------
Tablet 'TabPro'$120 million$80 million3%
VR Headset 'Virtua'$10 million$90 million25%

Using the Boston Consulting Group (BCG) Matrix framework (where 'High Growth' is >10% and 'High Relative Market Share' is >1.0):

  1. Calculate the relative market share for each product.
  2. Classify each product within the BCG Matrix.
  3. Recommend a suitable strategy for each product.
Show solution outline

The key calculation is for Relative Market Share (RMS): Formula: RMS = (Firm's Sales) / (Largest Competitor's Sales)

1. Product 'Chrono' (Smartwatch)

  • Step 1: Calculate RMS RMS = $50 million / $100 million = 0.5
  • Step 2: Classify
    • Relative Market Share = 0.5 (Low, as it's < 1.0)
    • Market Growth Rate = 15% (High, as it's > 10%)
    • Classification: Question Mark
  • Step 3: Recommend Strategy This product is in a high-growth market but is not the market leader. InnovateTech must decide whether to 'build' its share by investing heavily in marketing and R&D to turn it into a Star, or to 'divest' if the cost of gaining share is too high.

2. Product 'TabPro' (Tablet)

  • Step 1: Calculate RMS RMS = $120 million / $80 million = 1.5
  • Step 2: Classify
    • Relative Market Share = 1.5 (High, as it's > 1.0)
    • Market Growth Rate = 3% (Low, as it's < 10%)
    • Classification: Cash Cow
  • Step 3: Recommend Strategy TabPro is a market leader in a mature market. The recommended strategy is to 'harvest'. This means investing just enough to maintain its market share ('hold') and using the significant positive cash flow generated to fund other products in the portfolio, such as the 'Virtua' VR headset.

3. Product 'Virtua' (VR Headset)

  • Step 1: Calculate RMS RMS = $10 million / $90 million = 0.11
  • Step 2: Classify
    • Relative Market Share = 0.11 (Low, as it's < 1.0)
    • Market Growth Rate = 25% (High, as it's > 10%)
    • Classification: Question Mark
  • Step 3: Recommend Strategy Like the Chrono, Virtua is a Question Mark. However, its market is growing even faster, but its relative market share is much weaker. This is a high-risk product. The firm needs to make a critical choice: commit substantial funds to 'build' market share in this potentially lucrative future market, or 'divest' now to avoid future losses, freeing up resources.
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