products and portfolis Flashcards

1
Q

Product Life Cycle

A

A theoretical model which describes the stages a product goes through over its life

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2
Q

Key Uses of the Product life Cycle Model

A

Forecast future sales trends
Help with market targeting and positioning
Help analyse & manage the product portfolio

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3
Q

Stages in the Product Life Cycle

A

Development
Introduction
Growth
Maturity
Decline / End

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4
Q

when does cash flow and sales peak and dump (product life cycle)

A

peak - maturity
dump -start of introduction

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5
Q

Why New Products Are Scrapped Before Launch

A

Inadequate demand
Action of competitors
Change in the external environment
Production problem
High costs
Does not fit in the firm’s product range
Life cycle expected to be too short

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6
Q

Introduction Stage features

A

New product launched on the market
Low level of sales
Low capacity utilisation
High unit costs
Usually negative cash flow
Distributors may be reluctant to take an unproven product
Heavy promotion to make consumers aware of the product

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7
Q

New Product Development

A

Time –consuming but CAD is reducing product development times
The cost of development rises as it approaches launch
Market research including a test launch often done to reduce the risk of product failure
Most new product ideas do not reach the launch phase

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8
Q

Strategies at the Introduction Stage

A

Aim – encourage customer adoption
High promotional spending to create awareness and inform people
Either skimming or penetration pricing
Limited, focused distribution
Demand initially from “early adopters”

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9
Q

Growth stage features

A

Expanding market but arrival of competitors
Fast growing sales
Rise in capacity utilisation
Product gains market acceptance
Cash flow may become positive
Unit costs fall with economies of scale
The market grows, profits rise but attracts the entry of new competitors

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10
Q

Strategies in the Growth stage

A

Advertising to promote brand awareness
Increase in distribution outlets - intensive distribution
Go for market penetration and (if possible) price leadership
Target the early majority of potential buyers
Continuing high promotional spending
Improve the product - new features, improved styling, more options

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11
Q

Maturity Stage featires

A

Slower sales growth as rivals enter the market = intense competition + fight for market share
High level of capacity utilisation
High profits for those with high market share
Cash flow should be strongly positive
Weaker competitors start to leave the market
Prices and profits fall

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12
Q

Strategies for Mature Products

A

Manage capacity & production
Promotion focuses on differentiation
Intensive distribution
Enter new segments
Attract new users
Repositioning
Develop new uses

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13
Q

Decline Stage features

A

Falling sales
Market saturation and/or competition
Decline in profits & weaker cash flows
More competitors leave the market
Decline in capacity utilisation –switch capacity to alternative products

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14
Q

Reasons Why Products Enter the Decline Stage

A

Technological advance
Changes in consumer tastes and behaviour
Increased competition
Failure to innovate and develop the product

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15
Q

Strategies for the Decline Stage

A

Maintain market share
Harvest by spending little on marketing the product
Rationalise by weeding out product variations
Price cutting to maintain competitiveness
Promotion to retain loyal customers
Distribution narrowed

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16
Q

Extending the Product Life Cycle

A

change price
Change promotion (e.g. new promotional message)
Change product - re-styling and product improvement
Look for alternative distribution channels
Develop new market segment
Find new uses for the product
Reposition the product

(basically chnage somthing, try new things)

17
Q

Weaknesses of the Product Life Cycle Model

A

The shape and duration of the cycle varies from product to product
Strategic decisions can change the life cycle
It is difficult to recognise exactly where a product is in its life cycle
Length cannot be reliably predicted
Decline is not inevitable

18
Q

Product Portfolio Analysis

A

Product portfolio analysis assesses the position of each product or brand in a firm’s portfolio to help determine the right marketing strategy for each

19
Q

wtf is the Boston Matrix

A

Boston Consulting Group developed this as a tool of portfolio analysis
It can be applied to the portfolio of products produced by a firm or the portfolio of businesses owned by a firm
Portfolio is the collection of businesses or products that make up a business

20
Q

Boston Matrix in Summary

A

Firms should analyse their portfolio (collection) of products
Products are categorised as:
Question marks (also known as problem children)
Stars
Cash cows
Dogs
The ideal is that firms should aim for a balanced portfolio with some products in each category

21
Q

the boston matrix explained

A

question marks = high market gorwth and low market share
dogs = low market gorwth and low market share
cash cows = low market gorwth and high market share
stars = high market gorwth and High market share

22
Q

product life cycle vs boston matrix

A

The Product Life Cycle
Is concerned with individual products
Is concerned with sales over time
The Boston Matrix
Is concerned with the firm’s portfolio of products
Focuses on cash flow from products

23
Q

“Question mark” Products

A

Low share of a rapidly growing market
Cash flow is negative
Have potential but the future is uncertain
Could become either a star or a dog

24
Q

Strategy for “Question Marks”

A

Invest to increase market share
Substantial investment to achieve growth at the expense of powerful competitors
Invest in promotion and other aspects of marketing
Build selectively

25
Star Products
High share of a rapidly growing market Position of leadership in a high growth market The product/business is relatively strong and the market is growing Require high marketing spending Net cash inflow is neutral or at best modestly positive
26
Strategy for Stars
Investment to sustain growth Build sales and/or market share Repel challenges from competitors
27
Cash Cow Products
High share of a slowly growing market Mature stage in the product life cycle Mature, successful product Dominant share Little potential for growth Large positive cash inflow
28
Strategy for Cash Cows
Defend market share Aim for short term profits Little need for investment Little potential for further growth Reduce investment in order to maximise short term cash flow and profits Use profits from cash cows to invest in new products
29
Dog Products
Dogs are either Products that have failed or Products that are in the decline phase of their life cycle Low share of a slowly growth market Not going anywhere & no real potential
30
Strategy for Dogs
Phase out or sell off (divest) Not worth investing in Any profit made has to be re-invested just to maintain market share Uses up more management time and resources than can be justified Divest or, at most, focus on a defendable niche
31
How Valuable is the Boston Matrix Model?
A useful tool for analysing product portfolio decisions But it is only a snapshot of the current position Has little or no predictive value Focus on market share and market growth ignores issues such as developing a sustainable competitive advantages