chap. 11 plc portfolio planning
TRANSCRIPT
Chapter 11 Jobber
Managing products: product life cycle,
portfolio planning and product growth
strategies
Product Life Cycle
Alternative PLC Patterns
Cadbury’s Caramel
Cadbury’s Caramel has
been marketed for many
years, but still receives
advertising support to
stimulate sales in a maturemarket.
Product Life Cycle
Uses.• Product termination.• Growth projections.• Marketing objectives and strategies
over the PLC.• Product planning.• The dangers of overpowering.
Nokia
The Nokia 5310 XpressMusic
includes a music player and FM
radio.
Marketing objectives and strategies over the product life cycle
Product Life Cycle
Limitations.
• Fads and classics.
• Marketing effects.
• Unpredictability.
• Misleading objective and strategy prescriptions.
Portfolio planning
Definition.
The process of managing products as groups (portfolios) rather than separate, distinct and independent entities.
Boston matrix
The Boston Consulting Group Growth-Share Matrix
Stars Problem children
Cash cows Dogs
7%
15%
0%
MarketGrowthRate
Market Share10 0
Strategic objectives and theBoston Box
Build sales and/or market share
Invest to maintain/increase leadership position
Repel competitive challenges
Stars
Build selectivelyFocus on defendable niche where
dominance can be achievedHarvest or divest the rest
Problem children
Harvest orDivest orFocus on defendable niche
DogsHold sales and/or market shareDefend positionUse excess cash to support stars,
selected problem children and new product development
Cash cows
Strategic objectives and theBoston Box
Build selectively Focus on defendable niche
where dominance can be achieved
Harvest or divest the rest
Problem children
Harvest orDivest orFocus on defendable niche
Dogs
Build sales and/or market shareInvest to maintain/increase
leadership positionRepel competitive challenges
Stars
Hold sales and/or market shareDefend positionUse excess cash to support stars,
selected problem children and new product development
Cash cows
Strategic objectives and theBoston Box
Hold sales and/or market share
Defend position Use excess cash to support
stars, selected problem children and new product development
Cash cows
Build selectivelyFocus on defendable niche where
dominance can be achievedHarvest or divest the rest
Problem children
Harvest orDivest orFocus on defendable niche
Dogs
Build sales and/or market shareInvest to maintain/increase
leadership positionRepel competitive challenges
Stars
Strategic objectives and theBoston Box
Build sales and/or market shareInvest to maintain/increase
leadership positionRepel competitive challenges
StarsBuild selectivelyFocus on defendable niche where
dominance can be achievedHarvest or divest the rest
Problem children
Harvest or Divest or Focus on defendable niche
DogsHold sales and/or market shareDefend positionUse excess cash to support stars,
selected problem children and new product development
Cash cows
The case of an unbalanced portfolio
High
Low
LowHigh
Mar
ket g
row
th ra
te
Market share
Boston example
Boston example
Criticisms of the Boston Box
• Cash flow predictions.
• Market share and market growth focus.
• Use of proxies.
• Market share preoccupation.
• Interdependencies.
• Building stars.
Criticisms of the Boston Box
• Competitor reactions.
• Self-funding assumption.
• ‘Market’ definition vagueness.
• Use of cash flow rather than profitability for resource allocation.
• Lack of precision.
The General Electric Market Attractiveness–Competitive Position Model
High
Low
LowHighCompetitive strength
Medium
Medium
1
2
5
4
3
Mar
ket a
ttra
ctive
ness
Market attractiveness
• Market size• Market growth rate• Beatable rivals• Market entry barriers• Social, political and legal factors
Competitive strength
• Market share• Reputation• Distribution capability• Market knowledge• Service quality• Innovation capability• Cost advantages
Criticisms of the GE Portfolio Model
• Difficulty of use.
• Managerial bias.
Implications of portfolio planning
Different products
Different roles
Different reward systems
Different types of managers