Product Portfolio Analysis

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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

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..

Drawing the BCG Matrix

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

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 Is your product starting to sums of money to embarrass your company? support
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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 Problem children worth spending cash flow good money on? Potential for the future?
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The BCG Matrix

Market Growth HighProblem Children

Stars

Dogs

Cash Cows

Low

Market Share 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

Market Growth

Problem Children
High

Stars

Dogs
Video

Cash Cows

Low

High 14 Market Share

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 (1) (2) (3)
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. BCG extension strategy D launch A Matrix now helps with the for B? possibly a dog? analysis

C
Time
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http://www.authorstream.com/Presentation/Sanjaysks344804-itc-education-ppt-powerpoint/
http://www.slideshare.net/ranjanvarma/bcg-matrix-foritc-ltd

Portfolio Analysis
GE Tool for Analyzing Opportunities & Ability to Compete

GE Portfolio Analysis

Classification of SBUs/products into nine cell matrix based on

Market Attractiveness
Multiple Indicators

Business Strength
Multiple 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 Analysis Sample Industry/Market Indicators Market Factors

Size Growth Rate Cyclicality Seasonality

Competition
Type of competitors Degree of Concentration

Financial & Economic

Contribution Margins Barriers to Entry or Exit
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GE Portfolio Analysis Industry/Market Indicators

Technological
Patents & copyrights Will it become obsolete

Sociopolitical
Social attitudes & trends Laws & government regulations

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GE Portfolio Analysis Business Strength Indicators Market

Companys Market Share Companys Sales or Share Growth Rate

Competition
Strength of product, promotion, price, distribution, financial resources, management relative to competition

Financial & Economic

Companys Margins Economies of scale
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GE Portfolio Analysis Business Strength Indicators Technological

Companys ability to cope with change Technological skills Patent Protection

Sociopolitical
Companys responsiveness & flexibility

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GE Portfolio Example
Market Factor Size Growth Profit Margins Weight .33 .33 .34 Rating (1- 5) 5 3 2 Value 1.65 .99 .68 3.32 .33 1.65 .68 2.66

Business Market Share .33 Product Quality .33 Distribution Net .34

1 5 2

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Thank You
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