Product PortfolioAnalysisXIME

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2.15 Product Product Portfolio AnalysisProduct 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 MatrixProduct Life Cycle shows the stages that products go through from development to withdrawal from the marketProduct 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 MatrixThe BCG Matrix:A means of analysing the product portfolio and informing decision making about possible marketing strategiesDeveloped by the Boston Consulting Group a business strategy and marketing consultancy in 1968Links growth rate, market share and cash flowWhat 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 - STARSStars 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 CowsCash Cows:High market shareLow growth markets maturity stage of PLCLow cost supportHigh cash revenue positive cash flows

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The BCG Matrix - DogsDogs:Products in a low growth market Have low or declining market share (decline stage of PLC)Associated with negative cash flowMay require large sums of money to supportIs your product starting to embarrass your company?

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BCG Matrix - ? Problem childQuestion mark ???Or Problem Child:Products having a low market share in a high growth marketNeed money spent to develop themMay produce negative cash flowPotential for the future?Problem children worth spending good money on?

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The BCG MatrixMarket GrowthMarket ShareHighLowHigh

Problem ChildrenStarsDogsCash Cows

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What stage of the BCG Matrix are these at?Put these onto a grid

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BCG Matrix GridMarket GrowthMarket ShareHighLowHigh

Problem ChildrenStarsDogsCash Cows

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The BCG MatrixImplications: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 MatrixImplications: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 MatrixImplications: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 MatrixImplications: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 MatrixSalesTimeABCDThe 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 AnalysisGE Tool for Analyzing Opportunities & Ability to Compete

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GE Portfolio AnalysisClassification of SBUs/products into nine cell matrix based onMarket AttractivenessMultiple Indicators

Business StrengthMultiple Indicators

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Steps In Developing GE MatrixSelect Factors & Indicators.Assign each indicator a weight (total = 1) based on its importance.Rate the industry on industry indicators and company on business indicators on scale of 1(weak) 5 (strong).Multiply weight times rating and total for summary measures.

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GE Portfolio AnalysisSample Industry/Market IndicatorsMarket FactorsSizeGrowth RateCyclicalitySeasonalityCompetitionType of competitorsDegree of ConcentrationFinancial & EconomicContribution MarginsBarriers to Entry or Exit

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GE Portfolio AnalysisIndustry/Market IndicatorsTechnologicalPatents & copyrightsWill it become obsoleteSociopoliticalSocial attitudes & trendsLaws & government regulations

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GE Portfolio AnalysisBusiness Strength IndicatorsMarket Companys Market ShareCompanys Sales or Share Growth RateCompetitionStrength of product, promotion, price, distribution, financial resources, management relative to competitionFinancial & EconomicCompanys MarginsEconomies of scale

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GE Portfolio AnalysisBusiness Strength IndicatorsTechnologicalCompanys ability to cope with changeTechnological skillsPatent ProtectionSociopoliticalCompanys responsiveness & flexibility

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GE Portfolio Example

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Thank You

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