Extension Strategies and the Product Portfolio
An extension strategy is an action a business takes to boost or maintain a product's sales during maturity, delaying it entering the decline stage, for example new packaging, a price promotion, advertising to a new market, finding a new use for the product, or a minor product variation.
Before you start
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Method
- Learn the purpose of an extension strategy: to boost or maintain sales once a product reaches maturity, delaying the decline stage, rather than replacing sales already lost to decline.
- Learn specific extension strategies: new packaging or design, price changes or promotions, advertising in a new way or to a new market, finding new uses for the product, and minor product variations such as new flavours or features.
- Learn why a business manages a portfolio of products rather than just one: it spreads risk, since not all products decline at the same time, and lets revenue from mature or successful products fund the development of new ones.
- Learn the four Boston Matrix categories, what each axis measures, and the cash implications of each: stars need investment but can generate strong future cash flow; cash cows generate reliable profit with little investment; problem children or question marks need investment and a decision on whether to develop or drop them; dogs generate little cash and are often withdrawn.
- Practise placing a product into the correct Boston Matrix category from a short scenario, based on the market growth and market share information given.
- For 'explain' questions, name the extension strategy or category plus the linked reason or consequence for the business's sales, cash flow or portfolio balance.
- For 'recommend' or 'evaluate' questions, weigh the options, such as invest, extend or withdraw, against the product's Boston Matrix position and the case's business circumstances, then reach a supported judgement.
Worked example
Larkspur Drinks has two products. Product A is a fruit juice in a market growing quickly, and Larkspur has the largest market share among all juice brands in that market. Product B is a cordial in a market that is shrinking, and Larkspur has one of the smallest market shares among cordial brands. Classify each product using the Boston Matrix, and recommend one action Larkspur should consider for Product B.
- Identify Product A's market growth: high, since it is a market growing quickly.
- Identify Product A's relative market share: high, since it is the largest share in that market.
- High growth plus high share means Product A is a star, so Larkspur should keep investing in it to help it maintain its strong position, and it may become a cash cow as the market matures.
- Identify Product B's market growth as low, since the market is shrinking, and its relative market share as low, since it holds one of the smallest shares, meaning low growth plus low share classifies Product B as a dog.
- Recommend an action for Product B: since dogs typically generate little cash and have poor prospects, Larkspur should consider either withdrawing Product B from the market or applying a low-cost extension strategy, such as a price promotion to clear stock, rather than investing significant new resources into it.
Practice questions
Try each question, then tap to reveal the answer.
Q1What is an extension strategy?Show answer
Answer: An action a business takes to boost or maintain a product's sales during maturity, delaying it entering the decline stage.
Q2Give one example of an extension strategy.Show answer
Answer: New packaging or design, a price promotion, advertising to a new market, finding a new use for the product, or a minor product variation (any one).
Q3What two factors does the Boston Matrix measure?Show answer
Answer: A product's relative market share and the growth rate of its market.
Q4What is a 'cash cow' in the Boston Matrix?Show answer
Answer: A product with a high market share in a low-growth market, which generates strong, reliable profit with relatively little investment needed.
Q5What is a 'star' in the Boston Matrix?Show answer
Answer: A product with a high market share in a high-growth market, needing continued investment but with strong future potential.
Q6Why might a business keep a 'dog' product in its portfolio, rather than withdrawing it immediately?Show answer
Answer: For example, it may still generate some cash, complete the product range for existing customers, or the business may be phasing it out gradually rather than withdrawing it suddenly.
Q7Why is having a balanced product portfolio, with products in different Boston Matrix categories, useful to a business?Show answer
Answer: It spreads risk across products at different life cycle stages, and cash generated by cash cows can fund the development of question marks or stars, giving the business more stable overall revenue.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Explain ONE reason why a business might use an extension strategy on a product that has reached the maturity stage of its life cycle.
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Riverbank Games classifies its board game, Coastline, as a 'problem child' in the Boston Matrix: it is in a fast-growing hobby games market but currently has a low market share compared with competitors. Riverbank Games has limited funds and must decide whether to invest heavily in marketing Coastline to grow its market share, or to withdraw it and focus its limited resources on its existing 'cash cow' product. Evaluate what Riverbank Games should do.
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See real GCSE Business past-paper questions, with official mark schemes →
Free printable worksheet
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