Product PortfolioAnalysis

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2XIME 2.15 Product

Product Portfolio Analysis

Product portfolio analysis looks at the range of products and brands (product portfolio) that a firm has under its control. This type of analysis can help a firm identify where every single one of its products is positioned in the market.

Perhaps the most common type of product portfolio analysis that firms use to analyse their product mix is the BCG Matrix. The AQA specification states that students need to know this form of product portfolio analysis.

TATA group runs a business Empire. How many different type of products does they have under its control?

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Product Life Cycles and the BCG Matrix

Product Life Cycle – shows the stages that products go through from development to withdrawal from the market

Product Portfolio – the range of products a company has in development or available for consumers at any one time

Managing product portfolio is important for

cash flow

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BCG Matrix

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The BCG Matrix

The BCG Matrix:A means of analysing the product portfolio and informing decision making about possible marketing strategies

Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968

Links growth rate, market share and cash flow

What do these terms mean?

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BCG Matrix – key terms..

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Drawing the BCG Matrix

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The BCG Matrix - STARS

Stars – products in markets experiencing high growth rates with a high or increasing share of the market

- Potential for high revenue growth

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The BCG Matrix – Cash Cows

Cash Cows:

High market share

Low growth markets – maturity stage of PLC

Low cost support

High cash revenue – positive cash flows

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The BCG Matrix - Dogs

Dogs:

Products in a low growth market

Have low or declining market share (decline stage of PLC)

Associated with negative cash flow

May require large sums of money to support Is your product starting to

embarrass your company?

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BCG Matrix - ? Problem child

Question mark ???Or Problem Child:

- Products having a low market share in a high growth market

- Need money spent to develop them

- May produce negative cash flow

- Potential for the future?

Problem children – worth spending good money on?

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The BCG Matrix

Problem Children Stars

Dogs Cash Cows

Market Growth

Market Share

High

Low High

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What stage of the BCG Matrix are these at?

Put these onto a grid

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BCG Matrix Grid

Problem Children Stars

Dogs Cash Cows

Market Growth

Market Share

High

Low High

Video

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The BCG Matrix

Implications:

Dogs:Are they worth persevering with?

How much are they costing?

Could they be revived in some way?

How much would it cost to continue to support such products?

How much would it cost to remove from the market?

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The BCG Matrix

Implications:

Problem Children:What are the chances of these products securing a hold in the market?

How much will it cost to promote them to a stronger position?

Is it worth it?

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The BCG Matrix

Implications:

Stars:Huge potential – how?

May have been expensive to develop – why?

Is it worth spending money to promote?

What issues are there with product life cycle?

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The BCG Matrix

Implications:Cash Cows:

Why are they cheap to promote?Generate large amounts of cash – are these used for further R&D?Do you think there are any costs of developing and promoting these products?Is there a need to monitor their performance – the long term?What stage of the PLC are these at?

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The Product Life Cycle and the BCG Matrix

Sales

Time

AB

C

D

The product portfolio – four products in the portfolio

(1)

(1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’

(2)

(2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog?

(3)

(3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’?

Importance of maintaining a balance of products in the portfolio at different stages of the PLC – BCG Matrix helps with the analysis

http://www.authorstream.com/Presentation/Sanjaysks-344804-itc-education-ppt-powerpoint/

http://www.slideshare.net/ranjanvarma/bcg-matrix-for-itc-ltd

Portfolio Analysis

GE Tool for Analyzing Opportunities & Ability to Compete

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GE Portfolio Analysis

Classification of SBUs/products into nine cell matrix based on

Market AttractivenessMultiple Indicators

Business StrengthMultiple Indicators

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Steps In Developing GE Matrix

1. Select Factors & Indicators.

2. Assign each indicator a weight (total = 1) based on its importance.

3. Rate the industry on industry indicators and company on business indicators on scale of 1(weak) – 5 (strong).

4. Multiply weight times rating and total for summary measures.

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GE Portfolio AnalysisSample Industry/Market Indicators

Market FactorsSize

Growth Rate

Cyclicality

Seasonality

CompetitionType of competitors

Degree of Concentration

Financial & EconomicContribution Margins

Barriers to Entry or Exit

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GE Portfolio AnalysisIndustry/Market Indicators

TechnologicalPatents & copyrights

Will it become obsolete

SociopoliticalSocial attitudes & trends

Laws & government regulations

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GE Portfolio AnalysisBusiness Strength Indicators

Market Company’s Market ShareCompany’s Sales or Share Growth Rate

CompetitionStrength of product, promotion, price, distribution, financial resources, management relative to competition

Financial & EconomicCompany’s MarginsEconomies of scale

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GE Portfolio AnalysisBusiness Strength Indicators

TechnologicalCompany’s ability to cope with change

Technological skills

Patent Protection

SociopoliticalCompany’s responsiveness & flexibility

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GE Portfolio Example

.68

2.66

2.34Distribution Net

1.655.33Product Quality

.331.33Market Share

Business

.68

3.32

2.34Profit Margins

.993.33Growth

1.655.33Size

ValueRating (1- 5)WeightMarket Factor

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Thank You