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Product portfolio analysis

Product portfolio analysis. What is a product portfolio?. A product portfolio or product mix is the range of products owned by a business.

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Product portfolio analysis

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  1. Product portfolio analysis

  2. What is a product portfolio? • A product portfolio or product mix is the range of products owned by a business. • A firm’s product portfolio can be a range of different products. It can also be a range of similar products known as a product line, e.g. televisions are a product line including flat screen, HD screen, portable tv, etc.

  3. Why ? • Most firms produces a portfolio of products in order : • to spread risks (profits from one product compensate losses from others) and • to benefit from economies of scale such as reduced unit cost on advertising, distribution and production costs.

  4. The BCG matrix • The BCG Matrix is a useful technique for firms to analyze their product portfolios. The model was developed by the consultancy firm Boston Consulting Group andis sometimes known as the Boston matrix. • Under the BCG Matrix products are categorized according to 2 criteria: • Market growth potential – how fast the market for the product is growing? • Market share – how strong is the product in its market? • Products are then placed in one of four categories on the Boston matrix: Problem children, Stars, Cows and Dogs.

  5. Managing/analyzing the product portfolio • Product portfolio analysis is looking at the range of products a business offers to ensure that it has well performing products and also new products to replace declining ones.

  6. BCG matrix also known as Boston matrix Market share Market Growth potential

  7. Problem children • Problem children also known wild cats or questionmarks are products with a low market share and a high potential for growth. They tend to be new products. • In a fast growing market, a firm needs to investigate its problem children and decides which ones to drop and which ones to develop. Large amount of investment is needed to turned them into stars. Therefore cash flow from problem children can be zero or negative.

  8. Stars • Stars are products that have a high market share and a high potential for further growth. • They are already profitable but will require large investment to support further growth (e.g. advertising) in order to become cash cows. Therefore net cash flow is low.

  9. Cash cows • Cash cows are products with a high market share but a low potential for growth. They have reached their maturity stage and are highly profitable. • Because growth has started to slow down, there will little spending on promotion. Therefore cash flow tend to be high and should be milked.

  10. Dogs • Dogs are products with low market share and low potential for growth. They may still generate some cash but have little to offer for the future and need to be terminated soon.

  11. Usefulness of BCG Matrix • BCG matrix can be used to analyze and balance a firm’s portfolio of products. A business must not have too many or too few of each type of products. • It can also measure cash flow, profitability and sustained growth • A large firm can use it to analyzed its portfolio of • divisions or subsidiaries

  12. Assignment

  13. The origins of the i-Phone can be found in Steve Job’s instruction to Apple engineers in 2003 to investigate touch screens. He believes that mobile phone were going to become important and was determined to create a device that integrated a mobile phone , internet and an iPod. It was launched in 2007 and sales in 2008 was 10 million in 2008. • Explain 2 influences on the development of the i-Phone. • Using Boston matrix, discuss whether the i-Phone can be categoriszed as a child or star in 2008.

  14. Assignment: Unit 18 Q2.a • The article clearly indicate two factors that have influenced the development of the Iphone. • Firstly, it is the entre _________skills of Steve Job, the Apple CEO, who was the driving force behind the Iphone project. • Secondly, it is the development of _______ ________ technology that has also enable the development of the Iphone

  15. Unit 18 Q2.b • It is clear that the i-phone is no longer a _____ _______ in 2008 as Apple has decided not to discard it and it is growing very fast. • However, the i-phone should be considered a _____ and not a _____ because it still has a _____ growth potential and a _____ market share. It is still growing and has not yet reached its _______ stage.

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