How do firms divide a market and decide where to compete?
Market analysis through segmentation, targeting and positioning, the calculation and interpretation of market size, growth and share, the product life cycle and extension strategies, and the Boston matrix for managing a product portfolio.
A focused answer to the OCR A-Level Business marketing theme on market analysis, covering segmentation, targeting and positioning, the calculation of market size, growth and share, the product life cycle and extension strategies, and the Boston matrix for portfolio decisions.
Reviewed by: AI editorial process; not yet individually human-reviewed
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What this theme is asking
OCR wants you to analyse a market: how to divide it (segmentation), choose where to compete (targeting and positioning), measure it (size, growth and share), and manage products through their life and across a portfolio (the product life cycle and the Boston matrix). Several of these are calculation skills.
Segmentation, targeting and positioning
Effective segmentation lets a firm tailor its mix to a group it can serve well, rather than diluting effort across everyone. A perceptual map (plotting products on axes such as price and quality) is a common way to find a gap to position into.
Market size, growth and share
A crucial insight: a firm's sales can grow while its share falls, if the whole market grows faster. Examiners reward candidates who spot that absolute growth and relative competitiveness can move in opposite directions.
The product life cycle
The life cycle guides the marketing mix: heavy promotion at launch, competitive pricing and distribution at maturity, and extension or withdrawal in decline. Managing a portfolio of products at different stages keeps overall cash flow steady, because mature cash-generators fund the launch of new products.
The Boston matrix
The strategy: invest in stars to keep them leading, milk cash cows to fund that investment, decide whether to back or drop question marks, and usually phase out dogs (though a dog may still be profitable or complete a range). Its limit is that it uses only two variables and ignores profitability and external factors.
Examples in context
Lucozade is a classic case of extension strategies, repositioned from a sickroom drink to a sports drink to prolong maturity. Coca-Cola would sit as a cash cow on the Boston matrix (high share, low-growth market), funding investment in newer drinks that are stars or question marks. A streaming service segments by viewing behaviour and positions on content and price against rivals on a perceptual map.
Try this
Q1. A market grows from to . Calculate the market growth rate. [2 marks]
- Cue. .
Q2. Analyse one way the product life cycle could guide a firm's marketing decisions. [6 marks]
- Cue. The stage (launch, growth, maturity, decline) dictates the mix, for example heavy promotion at launch or an extension strategy in maturity, developed as a chain in context.
Exam-style practice questions
Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
OCR H431/01 20216 marksA firm's sales rise from to in a market that grows from to . Calculate the firm's market share in each year and comment on its competitiveness. (6)Show worked answer →
A Component 1 calculation rewarding both formulae, working and a comment. Year 1 share . Year 2 share . Although the firm's sales grew (by 15%), its share fell from 10% to 9.2% because the market grew faster (by 25%). Comment: the firm is losing competitiveness in relative terms, since rivals captured more of the market growth; growing sales can mask a declining share. Markers reward both share calculations, the units, and the insight that absolute growth and relative share can move in opposite directions.
OCR H431/02 202016 marksEvaluate the usefulness of the Boston matrix to a UK food manufacturer managing a large product portfolio. (16)Show worked answer →
A 16-mark evaluation on a four-level grid. Useful: the Boston matrix classifies products by market share and market growth into stars, cash cows, question marks and dogs, helping the firm balance its portfolio, decide where to invest (back the stars and promising question marks) and where to milk or withdraw (cash cows and dogs). Chain: identifying cash cows shows which products fund investment in stars, supporting balanced cash flow. Limitations: it is a snapshot using only two variables, ignores profitability and external factors, and a "dog" may still be profitable or strategically useful (it may complete a range). Evaluation: the matrix is a helpful starting framework for portfolio decisions but must be combined with profit data, product life cycle analysis and market knowledge. A judged conclusion reaches the top band.
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Sources & how we know this
- OCR A-Level Business (H431) specification — OCR (2015)