IB Business Management HLTopic 6 — The Toolkit in PracticePapers 1, 2 & 3Exam skill~11 min read
Applying the BCG Matrix and Decision Trees
These two tools answer different questions, and case studies love pairing them. The BCG matrix asks which product deserves the money. A decision tree asks which project is worth doing. Get the two jobs separate in your head and these questions stop being confusing.
📘 What you need to know
BCG sorts products. Two axes: relative market share and market growth.
Decision trees compare projects. Expected value = payoffs times probabilities, minus cost.
They fit together: BCG says where to spend, the tree says whether a specific spend pays.
Show every calculation line. Method marks survive an arithmetic slip.
When two expected values are close, say so and switch to non-financial factors.
Both tools rest on estimates, so the strongest evaluation attacks the quality of the data.
Two tools, two jobs
If a case study gives you a portfolio table and a tree diagram, it wants both tools in the same answer, not one after the other.
The mini case: Bruna Coffee
Bruna Coffee runs 210 cafes. Its drinks portfolio in its main market looks like this: Classic Espresso holds 42% of a market growing at 1%; Cold Brew holds 28% of a market growing at 15%; Olive Oil Latte holds 4% of a market growing at 20%; Bottled Iced Tea holds 5% of a market that is flat. Bruna has money for only one major move. Option A is a $4m campaign to refresh its existing range in its current country, with a 0.7 chance of $13m revenue and a 0.3 chance of losing $1m. Option B is a $9m flagship store in a new country where coffee is cheap and local chains are loved, with a 0.5 chance of $26m revenue and a 0.5 chance of losing $2m.
Step one: place the products
Product
Share
Market growth
BCG category
Classic Espresso
42%
1%
Cash cow — big share, tired market
Cold Brew
28%
15%
Star — big share, fast market
Olive Oil Latte
4%
20%
Question mark — small share, fast market
Bottled Iced Tea
5%
0%
Dog — small share, dead market
Always quote both numbers when you classify. “Cold Brew is a star because it holds 28% of a market growing at 15%” scores the application mark. “Cold Brew is a star” does not.
Step two: run the numbers
WORKED EXAMPLE
Calculate the expected value of each option. [4 marks]
Option A: refresh the existing range$13m × 0.7 = $9.1m−$1m × 0.3 = −$0.3m$9.1m − $0.3m = $8.8m$8.8m − $4m cost = $4.8mOption B: flagship store abroad$26m × 0.5 = $13m−$2m × 0.5 = −$1m$13m − $1m = $12m$12m − $9m cost = $3mOption A $4.8m, Option B $3.0mthe loss branches must stay negative all the way through
Step three: put them together
WORKED EXAMPLE
Using the BCG matrix and the decision tree, recommend what Bruna Coffee should do with its available funds. [10 marks — extract]
Start with the numbersOption A has an expected value of $4.8m against Option B’s $3.0m, and it needs $4m rather than $9m. On financial grounds alone Option A wins on both size and risk.Bring in the portfolioWithin Option A the money should go behind Cold Brew, the star on 28% of a market growing at 15%. Spending there defends a strong position in a growing market, which buys future revenue rather than propping up a flat one.Where the money comes fromClassic Espresso, the cash cow on 42% of a 1% market, generates the funds. It needs protecting, not promoting, so redirecting spend from it to Cold Brew is exactly what the matrix is for.The other sideOption B’s probabilities are a coin flip in a country where coffee sells for half Bruna’s usual price and local chains are loved, so 0.5 may itself be optimistic. Meanwhile Olive Oil Latte, on 4% of a market growing at 20%, is the long-term prize and gets nothing under this plan.JudgementBruna should take Option A and put the bulk behind Cold Brew, holding back a small share for a limited trial of Olive Oil Latte. That protects the star, tests the question mark cheaply, and avoids a $9m bet on estimates nobody can verify. If a further year of data showed the new market accepting premium pricing, Option B would deserve another look.Option A, spent on Cold Brew, with a small trial for Olive Oil Lattenumbers, category, funding source, other side, decision — that is the full shape
🧩 Order of attack for a combined question
Do the arithmetic first. The expected values anchor everything else.
Classify the products and quote share and growth for each one you mention.
Name the funding source. Usually the cash cow.
Give the counter-argument, including one attack on the estimates themselves.
Decide, and set a trigger: what new information would change the answer.
💡 Exam tips
Set the calculation out in lines, not one long sum. Examiners award the steps.
Write “$4.8m”, with units, every time.
Say plainly that an expected value is not a forecast of profit. It is a comparison figure.
Do not label a product without the numbers behind it.
Attack the probabilities when the case study gives you a reason to: strong local rivals, prices half the usual level, no experience in the market.
Give one recommendation. A list of options is not a judgement.
⚠ Common mix-ups
Forgetting to subtract the cost when the tree shows revenue.
Promoting the cash cow. It funds the growth; it is not usually where the money goes.
Calling every low-share product a dog. In a growing market it is a question mark.
Choosing the higher expected value with no comment on how reliable the probabilities are.
Doing the two tools in separate halves with nothing joining them.
Recommending everything at once when the case says there is money for one move.
Up next: Applying Business Plans and Descriptive Statistics — the last of the case-study pages, where the data comes as charts and tables and you have to turn it into an argument for a bank.
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