Chapter 11: Portfolio Analysis and Strategic Market Planning

Question 1

What is the purpose of portfolio analysis

Answer 1

take a strategic view of where a business is and where it wants to go with its portfolio of existing and future products

Question 2

Portfolio A: products all towards end of life cycle
Portfolio B: products at various stages of life-cycle

Which is better?

Answer 2

Portfolio B –> balanced

Although Portfolio A has good short-run profitability, poor strategic market planning will eventually leave this business with declining sales and profits.

Portfolio B, while perhaps not quite as profitable in the short run, is the better-positioned portfolio. It will continue to deliver growth in both sales and profits over time, as long as the business maintains a balanced portfolio of products that offer good customer value.

Question 3

what are the two components of deciding strategic direction for a product-market

Answer 3

• market attractiveness
• competitive position

Question 4

___________ and ___________ are measures of market attractiveness that correspond to sales and profits

Answer 4

Product life-cycle position and market growth rate

Question 5

what is a competitive position measure that corresponds to sales and profit performance

Answer 5

relative market share

Question 6

What are the three main categories of market attractiveness?

Answer 6

1. Market forces (mrkt size, growth rate, buyer power)
2. Competitive Environment (Number of competitors, ease of competitor entry, price rivalry)
3. Market Access (customer familiarity, channel access, sales requirements)

Question 7

What are the three main categories of competitive position

Answer 7

1. differentiation advantage (Product Quality, Service Quality, Brand Image)
2. Cost advantage (Unit Cost, Transaction Cost, Marketing Expenses)
3. Marketing Advantage (Market Share, Brand Awareness, Distribution)

Question 8

what are the main offensive strategies?

Answer 8

1. Invest to Grow
2. Improve Position
3. New Market Entry

Question 9

What are the main defensive strategies?

Answer 9

1. Protect Position
2. Optimize Position
3. Monetize
4. Harvest/Divest

Question 10

invest to grow

Answer 10

An offensive strategic market plan to invest marketing and sales resources to grow the market or a product’s position in a market (market share)

Question 11

Invest to Improve Position

Answer 11

An offensive strategic market plan that seeks to improve a business’s competitive position in an attractive segment of the market.

Question 12

new market entry

Answer 12

Invest to enter new attractive markets or develop new product-markets

Question 13

protect position

Answer 13

A defensive strategy to protect an attractive market position in which the business dominates with respect to competitive position

Question 14

optimize position

Answer 14

Many businesses implement a defensive strategy in the late- growth stage or the mature stage of the product life cycle. When growth potential is limited and competitive position is set, businesses need to optimize the marketing mix to produce maximum marketing profits. This is the time in the product life cycle when volumes are nearly at full potential and margins are still somewhat attractive. A busi- ness can incrementally reduce its investment in marketing resources because the product-market is mature or nearing maturity.

A business using this defensive strategy undertakes a conscious effort to reduce its customer base in order to reach a more profitable level of business. M

Question 15

monetize strategy

Answer 15

A defensive strategy used in less attractive markets in which a business has some level of competitive position. The strategy manages prices and marketing resources in a way that maximizes cash flow without exiting the market

Question 16

harvest strategy

Answer 16

A defensive strategy for maximizing profits and cash flow as a business slowly exits a product-market. Prices are increased to improve margins as volumes decline. In the short run, the strategy produces a higher gross profit. Reduc- tions in marketing expenses lower the cost of marketing. The business exits the market when no prospect for a short-run profit remains.

Question 17

divest strategy

Answer 17

A defensive strategy for exiting a market by selling or closing down the business or eliminating the product. Exiting a product-market is simply a way to cut losses quickly and reallocate marketing resources to more productive endeavors.

Question 18

offensive market plans are geared to deliver ….

Answer 18

above-average performance in the areas of sales growth, share posi- tion, and long-run profit performance

Question 19

defensive strategic mark plans are intended to ….

Answer 19

protect important share positions and produce short-run profit performance, while also contributing to long-run profit