Scoring models are the dominant method in only 18 percent of companies, but nonetheless are a fairly popular approach, with 38 percent of companies using these. Strategic approaches is employed by 65 percent of companies and is the dominant method for 27 percent of businesses. The company’s strategy is the second most popular portfolio approach. That is, product selection and the composition of the portfolio of products boils down to a financial calculation, and the rating and ranking of projects is based on this financial number or index. KleinschmidtĪs can be clearly seen above, financial methods are the most popular of the various project selection and prioritization methods with 77 percent of companies using this method overall, and 40 percent reporting it as the dominant method they rely on. Source: Portfolio Management for New Product Development: Results of an Industry Practices Study – Reference Paper #13 – By Dr. However, these products should not be so simply written off.įigure 5: Popularity of portfolio methods employed
In a recession, these products will be dropped. Businesses need to think carefully about retaining such products, as they offer little scope for profit-making. If successful, they become stars or cash cows.Ī dog has a low market share and is in a low-growth market. They tend to need large amounts of market research and promotion in order to succeed. Many new products are problem children at first. Because the market is growing, there is possibility for future sales increases, even if the product does not increase its market share. Question marks (or problem children) are competing in a competitive market, with a low market share and high market growth. A high proportion of cash cows is ideal for companies seeking high profits, but firms with cash cows will want to develop new products in order to enter high-growth markets The low rate of growth discourages competition, so it is possible to spend less on advertising. However, they usually generate profits that can support other products.Ĭash cows (with high market share in a low market growth market) often exist in established markets that have reached maturity. In the short term, stars may cause cash flow problems since expenditure exceeds income. The result is the company spends a great deal on promotional spending, and might involve the business in high capital investment to increase the capacity. A star product enjoys increasing sales revenue, but because it’s a growing market, competitors are attracted. Using this method, a company can quickly assess where each of their individual products lies in their own market.Ī star (named after “rising star”) has both high market share and is in high market growth. The Boston Matrix in Figure 4 is a business model which analyses the goods or services of a company in terms of their share of the market, which takes into consideration the rate of growth the market is currently experiencing.
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