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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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