portfolio management assemble by arsene kodjo. portfolio management the product life cycle (plc)...

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  • Portfolio management

    Assemble By Arsene Kodjo

  • Portfolio managementThe product life cycle (PLC)Four stages over a product PLCIntroduction- the product is launched Low sales, Profit almost inexistent, High cost of doing business, low adoption rate. synonymous to the question mark on the BCG matrixGrowth Stage- growing level of adoptionrapid market acceptance, growing competition, continuous investment in advertising. Synonymous to the Star on the BCG matrixMaturity stage- high and stable level of acceptance Stable sales revenues, slow market growth, low level of competition compare to the growth stage, strategies designed towards defending market share. Synonymous to the cash cow on the BCG matrix. Decline stage- declining sales Declining sales, very slow market growth, shift in customer need

  • Portfolio managementapplying the marketing mix over the PLC

  • Portfolio managementProduct Life Extension StrategiesOption 1. Try to get current customers to use the product more often and, thus, buy more of it Option 2. Find new customers (users) for the product, as Johnson & Johnson have done by marketing their baby powder, shampoo and lotion to all the family, not just as suitable for babies and small children. Option 3. Find new foreign customers for the product. Many companies look for overseas markets for their products to extend the PLC.

  • Portfolio managementStrategies at decline stageWithdrawing the product immediately. No further production and no sell-off of inventory. A slow withdrawal, where production halts but the inventory is pushed through the distribution chain. A phased withdrawal, where the elimination of the product is milked to maximise returns. This often involves changing the marketing mix strategy to reduce costs whilst seeking to increase returns from a core target market. Sell the product off to a competing company. Drop the product from the standard range an reintroduce it as a special product.

  • Portfolio managementCritics of PLCDifficult to locate industry position over the PLCDifficult to identify competitors position over the PLCDifferent product can be entered at different stages No criteria to determine when a product moves from one stage to anotherNot all products go through the Life Cycle

  • Portfolio management Ansoffs Growth Matrix

  • Portfolio management Ansoffs growth matrixFour possible growth strategies a company can pursue:Market Penetration strategies- (increasing sales with your present products in your present markets)Buying competitors' customers through special sales promotion programsAttracting non-usersConvincing current clients to use more of your product/serviceOpen new outlets in existing markets or extend working hoursProduct development strategies (developing new products for your existing markets)new productsImproved version of existing productMarket development strategies (developing new markets for your existing products Advertising in a new mediumgeographical expansionnew uses for an existing product4. Diversification (selling new products or services to new people or markets)Related and unrelated diversification

  • Portfolio managementDirectional Policy Model

  • Portfolio management Directional Policy Matrix

    What make a product market attractive or a business strong?

    Market attractivenessBusiness strengthGrowth rateMarket sizeCompetitive intensityProfit marginCompetitive offeringsTechnical standardsInfrastructurePayment/creditInterest rates/inflationRegulationBarriers to entryMarket intelligencePartnershipsGovernment supportProduction capacityFlexible productionAdaptability to marketUnit cost of productionPrice policyInnovationBrandingImageMarket shareContactsSupply chainSales forceMarket knowledgeRelationships

  • Portfolio managementdirectional policy matrixPossible strategiesInvest for growthManage selectively to increase earning Harvest or divest loss making business

  • Value chain analysis

  • Value chain analysis1What is Value Chain Analysis: Describes the activities that take place in a business and help managers identify how these activities can be managed successfully in order to increase the companys profit marginsPrimary activities- directly concerned with creating and delivering a product to the customer. They include:In-bound logistics: receiving, storing and distributing internallyOperations: assembling, production, packagingout-bound logistics: distribution , supply chain, warehousing marketing and sales: Market selection, Product management, R&DServices: After sales services, resolving customer complaintsSupport activities- Support day-to-day activitiesHuman resource: experience and commitmentTechnology: to facilitate process and productionProcurement : supplier selection and relationship, proximity for customersFirms financial infrastructure: to finance projects, salaries and shareholders

  • Value Chain AnalysisSource of competitive advantage1-Cost leadership- Identify and control cost drivers in order to achieve cost advantage. Sources of cost leadership include:Economies of scale: learning curve benefitsLinkages :Time spent liaising with other departments Interrelationships: Shared activities Integration: the extent of vertical integrationTiming: Stocking for prompt delivery Location issues: procurement sourcecapacity utilisation : linked with production2- Differentiation Identify and add cost to areas widely valued by customers and charge premium price in excess of the added cost. Differentiation can be achieved throughout the activities identified by the matrix( both primary and support activities)

  • Porters Generic Strategies

  • Porters Generic StrategiesCost leadership is where a company achieves lower cost than its rivals and competes across a broad range of segments.Differentiation occurs when the company has a range of clearly differentiated products which appeal to different segments of the market.Focus strategies are where a company decides to concentrate on only one segment or few.