Professional Documents
Culture Documents
M &A
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
Product
Each product may have a different life cycle PLC determines revenue earned Contributes to strategic marketing planning May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc. May help in new product development planning May help in forecasting and managing cash flow
The
The Development Stage: Initial Ideas possibly large number May come from any of the following
Market research identifies gaps in the market Monitoring competitors Planned research and development (R&D) Luck or intuition stumble across ideas? Creative thinking inventions, hunches? Futures thinking what will people be using/wanting/needing 5,10,20 years hence?
Product
Development: Stages
New ideas/possible inventions Market analysis is it wanted? Can it be produced at a profit? Who is it likely to be aimed at? Product Development and refinement Test Marketing possibly local/regional Analysis of test marketing results and amendment of product/production process Preparations for launch publicity, marketing campaign
Introduction/Launch:
Advertising and promotion campaigns Target campaign at specific audience? Monitor initial sales Maximise publicity High cost/low sales Length of time type of product
Growth:
Increased consumer awareness Sales rise Revenues increase Costs - fixed costs/variable costs, profits may be made Monitor market competitors reaction?
Maturity:
Sales reach peak Cost of supporting the product declines Ratio of revenue to cost high Sales growth likely to be low Market share may be high Competition likely to be greater Price elasticity of demand? Monitor market changes/amendments/new strategies?
Saturation:
New entrants likely to mean market is flooded Necessity to develop new strategies becomes more pressing: Searching out new markets:
Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures media/music, etc.
Developing new uses Focus on adapting the product Re-packaging or format Improving the standard or quality Developing the product range
Decline
and Withdrawal:
Product outlives/outgrows its usefulness/value Fashions change Technology changes Sales decline Cost of supporting starts to rise too far Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
Sales
Development
Introduction
Growth
Maturity
Saturation
Decline
Time
Time
PLC
Profits Losses Break Even Time
The
Boston 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
Classifies
Products into four simple categories: Stars products in markets experiencing high growth rates with a high or increasing share of the market - Potential for high revenue growth
Cash
Cows:
High market share Low growth markets maturity stage of PLC Low cost support High cash revenue positive cash flows
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
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?
Stars
Dogs
Cash Cows
Low
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?
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?
Implications:
Stars:
Huge potential May have been expensive to develop Worth spending money to promote Consider the extent of their product life cycle in decision making
Implications:
Cash
Cows:
Cheap to promote Generate large amounts of cash use for further R&D? Costs of developing and promoting have largely gone Need to monitor their performance the long term? At the maturity stage of the PLC?
Importance of (3) Cash from (2) Cash from B maintaining a C (1) A is at maturity The product used support balance of products used to support stage to cash cow. portfolio four growth of funds D and in the portfolio atfor Generates C through growth products in the possibly toto finance different stages of the development of stage and portfolio the PLC D. Boston extension strategy D launch A now Matrix helps with the for B? possibly a dog? analysis
C
Time
Sociocultural
SWOT Analysis
Strengths
Weaknesses Opportunities
Threats
provides an overview of the strategic situation. It provides the raw material to do more extensive internal and external analysis.
Opportunities
An
OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment. Possible Opportunities:
Emerging customer needs Quality Improvements Expanding global markets Vertical Integration
Threats
A
THREAT is a factor in your companys external environment that poses a danger to its well-being. Possible Threats:
New entry by competitors Changing demographics/shifting demand Emergence of cheaper technologies Regulatory requirements
examining opportunities, you can discover untapped markets, and new products or technologies, or identify potential avenues for diversification. By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.
five forces are environmental forces that impact on a companys ability to compete in a given market. The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.
Barriers to Entry
Switching Costs
Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
Expected revenge
Supplier industry is dominated by a few firms Suppliers products have few substitutes
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Buyer is not an important customer to supplier Suppliers product is an important input to buyers product
Suppliers products are differentiated Suppliers products have high switching costs Supplier poses credible threat of forward integration
Staging advertising battles Increasing consumer warranties or service Making new product introductions
Competitor Analysis
The follow-up to Industry Analysis is effective analysis of a firms Competitors
Competitor Analysis
Assumptions What assumptions do our competitors hold about the future of industry and themselves? Current Strategy Does our current strategy support changes in the competitive environment? Future Objectives How do our goals compare to our competitors goals? Capabilities How do our capabilities compare to our competitors?
Response
What will our competitors do in the future? Where do we have a competitive advantage?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where will emphasis be placed in the future? What is the attitude toward risk?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? toward risk? Does this strategy support changes in the competitive structure?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future support changes in the will be volatile? competition structure? What assumptions do our competitors hold about the industry and themselves? Are we assuming stable competitive conditions?
What does the competitor believe about itself and the industry?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future supportwill changes in the be volatile? competition structure? What assumptions do our competitors hold about the Capabilities industry and themselves? What are my competitors Are we operating under strengths and weaknesses? a status quo? How do our capabilities compare to our competitors?
Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where Current will emphasis be Strategy placed in the future? How are we currently What is the attitude competing? Assumptions toward risk? Does this strategy Do we assume the future supportwill changes in the be volatile? competition structure? What assumptions do our Capabilities competitors hold about the industry and themselves? What are my competitors Are we operating strengths under and weaknesses? a status quo? How do our capabilities compare to our competitors?
Response
What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?