Portfolio management Assemble By Arsene Kodjo

Portfolio management The product life cycle (PLC) Four stages over a product PLC 1.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 matrix 2.Growth Stage- growing level of adoption rapid market acceptance, growing competition, continuous investment in advertising. Synonymous to the “Star” on the BCG matrix 3Maturity 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. 4Decline stage- declining sales Declining sales, very slow market growth, shift in customer need

Portfolio management applying the marketing mix over the PLC

Portfolio management Product 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 management Strategies 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 management Critics 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 management Directional Policy Model

Portfolio management Directional Policy Matrix What make a product market attractive or a business strong? Market attractivenessBusiness strength Growth rate Market size Competitive intensity Profit margin Competitive offerings Technical standards Infrastructure Payment/credit Interest rates/inflation Regulation Barriers to entry Market intelligence Partnerships Government support Production capacity Flexible production Adaptability to market Unit cost of production Price policy Innovation Branding Image Market share Contacts Supply chain Sales force Market knowledge Relationships

Portfolio management directional policy matrix Possible strategies Invest for growth Manage selectively to increase earning Harvest or divest loss making business

Value chain analysis

1 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 2Primary 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 3Support 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 Analysis Source 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

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.