Upload
clement-shields
View
226
Download
0
Tags:
Embed Size (px)
Citation preview
Portfolio management
Assemble By Arsene Kodjo
Portfolio managementThe product life cycle (PLC)
• Four stages over a product PLC1. Introduction- 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 matrix2. Growth Stage- growing level of adoption• rapid market acceptance, growing competition, continuous investment in
advertising. Synonymous to the “Star” on the BCG matrix3 Maturity 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.
4 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 Strategies
• Option 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 stage”
• Withdrawing 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 PLC
• Difficult to locate industry position over the PLC
• Difficult to identify competitors position over the PLC
• Different product can be entered at different stages
• No criteria to determine when a product moves from one stage to another
• Not all products go through the Life Cycle
Portfolio management Ansoff’s Growth Matrix
Portfolio management Ansoff’s growth matrix
Four possible growth strategies a company can pursue:1. Market Penetration strategies- (increasing sales with your present products in your present
markets)• Buying competitors' customers through special sales promotion programs• Attracting non-users• Convincing current clients to use more of your product/service• Open new outlets in existing markets or extend working hours
2. Product development strategies (developing new products for your existing markets)
• new products• Improved version of existing product
3. Market development strategies (developing new markets for your existing products • Advertising in a new medium• geographical expansion• new uses for an existing product
4. 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 attractiveness Business strength
Growth rateMarket sizeCompetitive intensityProfit marginCompetitive offeringsTechnical standardsInfrastructurePayment/creditInterest rates/inflationRegulationBarriers to entryMarket intelligencePartnershipsGovernment support
Production capacityFlexible productionAdaptability to marketUnit cost of productionPrice policyInnovationBrandingImageMarket shareContactsSupply chainSales forceMarket knowledgeRelationships
Portfolio managementdirectional policy matrix
Possible strategies
• Invest for growth
• Manage selectively to increase earning
• Harvest or divest loss making business
Value chain analysis
Value chain analysis1 What 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 company’s profit margins
2 Primary activities- directly concerned with creating and delivering a product to the customer. They include:
• In-bound logistics: receiving, storing and distributing internally
• Operations: assembling, production, packaging
• out-bound logistics: distribution , supply chain, warehousing
• marketing and sales: Market selection, Product management, R&D
• Services: After sales services, resolving customer complaints
3 Support activities- Support day-to-day activities
• Human resource: experience and commitment
• Technology: to facilitate process and production
• Procurement : supplier selection and relationship, proximity for customers
• Firm’s financial infrastructure: to finance projects, salaries and shareholders
Value Chain AnalysisSource of competitive advantage
1-Cost leadership- Identify and control cost drivers in order to achieve cost advantage. Sources of cost leadership include:
• Economies of scale: learning curve benefits
• Linkages :Time spent liaising with other departments
• Interrelationships: Shared activities
• Integration: the extent of vertical integration
• Timing: Stocking for prompt delivery
• Location issues: procurement source
• capacity utilisation : linked with production
2- 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)
Porter’s Generic Strategies
Porter’s Generic Strategies
1. Cost leadership is where a company achieves lower cost than its rivals and competes across a broad range of segments.
2. Differentiation occurs when the company has a range of clearly differentiated products which appeal to different segments of the market.
3. Focus strategies are where a company decides to concentrate on only one segment or few.