product line rationalization

Business News Analysis: Free Student Articles www.internsindia.com-A FREE site for MBA live projects.

Copy Right© Protected 2007-2009, www.internsindia.com, Sylloge Corporation

All Rights Reserved by www.internsindia.com

Only to be used for academic purpose.

Product Line Rationalization Strategy Mail us at [email protected] for further

details or to publish your articles on our website

Product line rationalization, as you all know is a concept designed to free the resources

and eliminate or out source the product from the portfolio that are not strategically fit

into the product portfolio as a whole. It is designed by a California based professor Mr.

Anderson who is a strategic consultant as well. Lets google Indian business with this

tool.

Increase in the consumer demand and disposable income is tuning

companies in experimental mode for various product line and widths. The process starts with hiring a market research company to give a

test drive to the concept. And then Ads campaigns, promotional offers and distribution push, all vital forces applied with Newton III law as

well.

In continuation with the process, board of director scrutinizes the snaky variations on the graph for the next few weeks. WOW! The

product got pick up in the market. Again the product portfolio got fatten up with a chubby look. I believe for a product portfolio to be in a

good shape every brand should work-out like different parts of an

organic body.

Whenever you look a product portfolio, please try to check the fundamental assumption for existence of a product in product profile

and match them with the current lifestyle and demand. I list down some of the ill effects of a heavy weight portfolio.

1) Mass Cannibalization :

a. Inter Category cannibalization: It happens when a product in different forms in different categories is available with

the same benefits. Example: HLL’s Clinic Plus Shampoo (Anti Dandruff) and Clinic Plus anti dandruff hair oil. The

later product has withdrawn from the market. Another recent example, I can quote is of Surf excel powder and

surf excel bar. Guess which will be the first one to say

good bye to the market b. Intra Category Cannibalization: It happens when different product in the same category and form serves the same





benefits. Surf Excel and Surf Excel Blue could be the best

examples. 2) Brand Image Dilution: I personally believe brand is an envelope and products are material inside. Putting material inside a 50 paisa envelope more than its capability will lead to its shape

distortion. Brand image and user imagery both are abstractions but indeed affect the consumer’s behavior. Over loading a brand

with different products will loose the specificity of the position. Example: If I say J&J , positioned for Baby care will the obvious

answer. Now I say J&J also manufactures medical equipments. Think and tell me what position you claim as an MBA. Health

care or any resembling word should strike your mind. Now what has happen here is that user imagery goes one level above and

increased the chances of substitute products. The higher the specificity of product lesser will be the substitute.

3) Opportunity cost: In opportunity cost, my point lies not in figurative terms but brand encashment. A brand extension

should be so as to cash the reputation of brand. Extending right brand in wrong product category will reduce the chance of brand

encashment for that period which could have encashed with a good extension. For example Bic, with its ballpoint pen origin,

successfully extended into disposable lighters and razors; Caterpillar, successfully extended from heavy machinery into

shoes, clothing and handbags. On the other hand extension of Safola in salt and then atta category is the biggest example of

opportunity cost.

4) Distribution and inventory cost: Multiple products with the same benefits over load the cost of inventory and distribution. I hope it

is self explanatory. If not write to me on articles@

Internsindia.com I will add in the article. 5) Operation Cost: because, typically, low-leverage products are inherently different with unusual parts, materials, set-ups, and processing. Often, these are older products that are built

infrequently with less common parts on older equipment using sketchy documentation by a workforce with little experience on

those products. There are lots of ill effects of shabby portfolio. I have quoted few

you can think of rest one.





I am not totally against of keeping low revenue brands in profile as

there age few strategic point of views because of which companies want to keep the low revenue brands in their portfolio. These

products are used differently than the normal milking brands. Some strategic moves are; price games, new product flanker, value

innovation and consumer loyalty.

But the acceptance of product line rationalization strategy is highly visible in few FMCG companies. We can take example of Nihar

disinvested by HLL to Mario as an exercise for product line rationalization.

For any query or more information about article write to us on

[email protected].

product line rationalization

Documents