Unit 3.2 — Market analysis and strategies (BCG & Ansoff)
Learning outcomes (from the 9587 syllabus). This note is complete when every bullet below is covered.
Learning outcomes
- Product portfolio analysis: Boston Consulting Group (BCG) Matrix — usefulness in analysing a product portfolio (market share and market growth)
- Product and market growth strategies: the Ansoff Matrix — market penetration; market development; product development; diversification; product and market risk review; usefulness in considering growth strategies
Running example: Tropicool sells several juice lines and is planning its next growth move.
Big picture
In plain English: two famous 2×2 grids help a business decide (1) which products to invest in (BCG) and (2) how to grow (Ansoff).
Analogy: the BCG Matrix is like managing a football squad — some players are stars now, some are promising young talents, some are steady veterans, and some should be sold. The Ansoff Matrix is like choosing your next move on a game board — stay safe or take a risk for a bigger reward.
Core content
1. The BCG Matrix (product portfolio analysis)
The BCG Matrix places each product on a 2×2 grid of market share (high/low) and market growth (high/low).
| Quadrant | Share | Growth | Meaning | Strategy |
|---|---|---|---|---|
| Star | High | High | A successful product in a growing market | Invest to keep growing |
| Cash cow | High | Low | A strong product in a mature market | “Milk” it — use its cash to fund others |
| Question mark (problem child) | Low | High | A risky product in a growing market | Decide: invest or drop |
| Dog | Low | Low | Weak product in a slow market | Divest (sell/drop) |
Usefulness: the matrix shows whether the portfolio is balanced — a business needs cash cows to fund stars and question marks, and should avoid too many dogs.
Tropicool’s portfolio: its no-added-sugar juice is a Star (growing health market, strong share) — Tropicool invests in it. Its original orange juice is a Cash cow (mature market, high share) — it funds the others. Its new energy smoothie is a Question mark — Tropicool must decide whether to invest or drop it. A failed vegetable juice is a Dog and should be discontinued.
2. The Ansoff Matrix (growth strategies)
The Ansoff Matrix shows four growth strategies based on products (new/existing) and markets (new/existing).
| Strategy | Product | Market | Risk | Example |
|---|---|---|---|---|
| Market penetration | Existing | Existing | Lowest | Sell more of the current juice to current customers (promotions, lower price) |
| Market development | Existing | New | Medium | Sell the current juice in a new market (export to Malaysia, new segment) |
| Product development | New | Existing | Medium | Launch a new juice for current customers |
| Diversification | New | New | Highest | Launch a completely new product in a new market |
Risk review: risk rises as the business moves away from what it knows (existing products/markets). Market penetration is safest; diversification is riskiest.
Tropicool’s growth options: market penetration (run a promotion to sell more juice to existing customers); market development (export the same juice to Indonesia); product development (launch a new sparkling juice for its existing customers); diversification (start selling health snacks — new product in a new market, the riskiest).
Analysis & evaluation points (AO3/AO4)
- BCG is a useful snapshot but oversimplifies — real products may not fit neatly, and the matrix ignores profits and other factors.
- A balanced portfolio is the goal — relying only on cash cows means no future growth; only stars means no cash to invest.
- Diversification is highest risk but can spread risk — it may also reduce overall risk by not depending on one market, even though the move itself is risky.
- Both matrices guide but do not decide — judgement is still needed.
Language bank: however · on balance · it depends on · trade-off ·
Worked examples (PEEL)
PEEL = Point → Explain → Example → Link. Use this structure for every written answer.
Worked example 1 — “Explain” (6 marks)
Question: Explain how a business can use the BCG Matrix.
- P (Point): The BCG Matrix helps a business decide where to invest.
- E (Explain): By classifying products by market share and market growth, the business can see which products to invest in, milk, or drop.
- E (Example): Tropicool uses cash from its cash-cow orange juice to invest in its star no-added-sugar juice and considers dropping its dog vegetable juice.
- L (Link): This directs resources to the products most likely to create future value.
Worked example 2 — “Evaluate” (10 marks)
Question: Evaluate which Ansoff strategy is best for a business wanting growth.
- P (Point): Market penetration is the lowest-risk strategy.
- E (Explain): It uses existing products and existing markets, so the business relies on what it already knows and does well.
- E (Example): Tropicool running a price promotion on its current juice risks little because the product and customers are already familiar.
- L (Link): This is safest when the market still has room to grow.
- Evaluate (AO4): However, penetration offers limited growth in a saturated market; higher-risk strategies like market development or diversification offer bigger opportunities. On balance, the best strategy depends on the market’s saturation and the firm’s resources — a saturated market and strong cash reserves may justify diversification despite the risk.
Application bank (Singapore quick reference)
| Idea | Singapore example |
|---|---|
| Star | Plant-based / health products in Singapore’s growing wellness market |
| Cash cow | BreadTalk’s core bread lines in mature Singapore |
| Diversification | Grab moving from ride-hailing into food delivery and payments |
| Market development | BreadTalk expanding its existing bakery format overseas |
| Product development | Ya Kun launching new menu items for existing customers |
Exam technique
- How it appears: a case study lists a firm’s products or growth options and asks you to classify (BCG) or recommend (Ansoff).
- Model skeleton for “recommend a growth strategy”: state the current product/market → evaluate each Ansoff option’s risk and fit → recommend one and justify.
- Common pitfalls: mislabelling quadrants; ignoring risk levels; not linking the matrix to the specific case.
Self-test checklist
Essay practice: “Evaluate the usefulness of the BCG Matrix to a business managing a range of products.” (25 marks)