-product life cycle and portfolio- Flashcards
What is the product life cycle?
A theoretical model that describes the stages a product goes through over its life.
Can be used to forecast future sales trends, help with market targeting/positioning and help analyse and manage product portfolio.
What are the five stages of the product life cycle?
Development Introduction Growth Maturity Decline/end
What are some extension strategies for the product life cycle?
Lowering the price Changing promotion Changing the product Looking for alternative distribution channels Developing a new market segment Find new uses for the product Repositioning the new product
What are some disadvantages of the product life cycle model?
The shape/duration of the cycle varies from product to product.
It is difficult to recognise where a product is in its life cycle.
Length cannot be reliably predicted.
Decline is not inevitable.
Key points of the development stage:
Complex/time consuming
Uses significant resources
Cost of development rises as launch approaches.
May not be successful
Test launch reduces risk
Can be long lead time before sales are produced
Key points of the introduction stage:
New product
Low level of sales likely
Low capacity utilisation and high unit costs
Negative cash flow
Distributors reluctant to take unproven product
Heavy promotion required
Key points of the growth stage:
Fast growing sales, wider distribution.
Rise in capacity utilisation, lower unit costs
Market acceptance gained.
Positive cash flow.
Market grows, entry of new competitors increases
Key points of maturity stage:
Slower sales due to competition, fight for market share
High level of capacity utilisation
High profits for those with high market share
Cash flow positive
Weaker competitors leave market
Prices/profits fall
Key points of the decline stage:
Falling sales Market saturation (competitors) Decline in profits, weaker cash flow More competitors leave Decline in capacity utilisation
What is the Boston Matrix?
A model used to analyse the strategic position of product and brand portfolios.
What does the Boston Matrix categorise products based on?
Amount of market share.
Amount of market growth.
What are the four areas of the Boston Matrix?
Stars
Cash cows
Question marks
Dogs
What are Stars?
High growth products competition in markets where they are strong in comparison to competitors.
Need heavy investment to sustain growth.
Growth will slow, and if they keep their market share, stars will become cash cows.
What are Cash Cows?
Low growth products with a high market share.
Mature and successful products that need little investment.
Need to be managed for continued profit so they continue to generate positive cash flow
What are Question Marks?
Products with low market share operating in high growth markets.
Need substantial investment to grow market share, due to larger competitors.
May have to consider opportunity cost, which to help grow and which to let fail/shrink.
