STARBUCKS PRODUCT PORTFOLIO ANALYSIS

A business with a range of products has a portfolio of products. However, owning a product portfolio poses a problem for a business. It must decide how to allocate investment (e.g. in product development, promotion) across the portfolio.

What is the Boston Matrix?

A portfolio of products can be analysed using the Boston Group Consulting Matrix. This categories the products into one of four different areas, based on:

Market share – does the product being sold have a low or high market share?

Market growth – are the numbers of potential customers in the market growing or not

How does the Boston Matrix work?

The four categories can be described as follows:

Stars are high growth products competing in markets where they are strong compared with the competition. Often Stars need heavy investment to sustain growth.

Cash cows are low-growth products with a high market share. These are mature, successful products with relatively little need for investment.

Question marks are products with low market share operating in high growth markets. This suggests that they have potential, but may need substantial investment to grow market share at the expense of larger competitors.

Unsurprisingly, the term “dogs" refers to products that have a low market share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Dogs are usually sold or closed.

Here is an example of Starbucks' Boston Matrix model

Coffee & Packed food: are products that operate in high growth markets and have high market share. They are products that tend to generate high amounts of cash for Starbucks. Meaning that the company will tend to invest money in developing and promotion their coffee and packed food.

Tea: Tea for Starbucks is a product that operate in a high market growth sector, but have low market share. Since Starbucks is more famous for their coffee, their tea represents inferior product quality or marketing to their competitors such as Twingings. Knowing that the tea market has high growth, Starbucks could analyse reasons for its low market share and to then develop strategies to gain higher share of the growing tea market.

Mugs: are products with high market share operating in a low growth market. This is more of a matured market and the products are very well established, therefore generating great net cash flow. Mugs for Starbucks provide them with a great amount of profits according to seasonal trends and have good profit quality.

Packaged Coffee beans: is a product with low marketing share as well as operating in a low growth market. Starbucks' packaged coffee beans do not generate much cash for the company as customers tend to go to Starbucks for quick and good service for coffee and food.