Chapter 11 Managing products: product life-cycle, portfolio planning and product growth strategies © 2012 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 

Product Life Cycle Sales and Profits Introduction Growth Maturity Decline Sales Profits 2

Samsung Samsung reminds its customers there are no limits with new products in its Galaxy range. 3

Product Life Cycle Uses. Product termination. Growth projections. Marketing objectives and strategies over the PLC. Product planning. The dangers of overpowering. 4

Heinz Heinz differentiated their cans of beans using the slogan Beanz Meanz Heinz and this campaign enabled Heinz to fend off competitors for decades. 5

Marketing objectives and strategies over the product life cycle Introduction Growth Maturity Decline Strategic marketing objective Harvest/manage for cash/divest Build Build Hold Strategic focus Expand market Penetration Protect share/innovation Productivity Product awareness/trial Brand objective Brand preference Brand loyalty Brand exploitation Products Basic Differentiated Differentiated Rationalised Promotion Creating awareness/trial Creating awareness/trial/ repeat purchase Maintaining awareness/ repeat purchase Cut/eliminated Price High Lower Lowest Rising Distribution Patchy Wider Intensive Selective 6

Product Life Cycle Limitations. Fads and classics. Marketing effects. Unpredictability. Misleading objective and strategy prescriptions. 7

Portfolio planning Definition. The process of managing products as groups (portfolios) rather than separate, distinct and independent entities. 8

The Boston Consulting Group Growth-Share Matrix 15% Problem children Stars Market Growth Rate 7% Cash cows Dogs 0% 10 Market Share 9

Strategic objectives and the Boston Box Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows Harvest or Divest or Focus on defendable niche Dogs 10

Strategic objectives and the Boston Box Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Stars Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows Harvest or Divest or Focus on defendable niche Dogs 11

Strategic objectives and the Boston Box Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows Harvest or Divest or Focus on defendable niche Dogs 12

Strategic objectives and the Boston Box Build sales and/or market share Invest to maintain/increase leadership position Repel competitive challenges Stars Build selectively Focus on defendable niche where dominance can be achieved Harvest or divest the rest Problem children Hold sales and/or market share Defend position Use excess cash to support stars, selected problem children and new product development Cash cows Harvest or Divest or Focus on defendable niche Dogs 13

The case of an unbalanced portfolio High Market growth rate Low High Low Relative market share 14

Criticisms of the Boston Box Cash flow predictions. Market share and market growth focus. Use of proxies. Market share preoccupation. Interdependencies. Building stars. 15

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. 16

The General Electric Market Attractiveness–Competitive Position Model 1 High 3 Market attractiveness Medium 2 4 Low 5 High Medium Low Competitive strength 17

Criticisms of the GE Portfolio Model Difficulty of use. Managerial bias. 18

Implications of portfolio planning Different products Different roles Different reward systems Different types of managers 19

Product growth strategies: the Ansoff Matrix Market penetration or expansion Existing Product development Markets New Market development Diversification Existing New Products 20

Strategic options for increasing sales volume Increase sale volume New products Promote new uses Innovation Product replacement Enter new segments Increase usage rates Convert non-users Discourage competitive entry Product line extension Buy competitors Win competitors’ customers Entry into new markets Market development Product Market expansion Market penetration 21

Core Reading Core reading to support this topic can be found in Chapter 11 of your recommended text 22