Title Slide. These slides support Chapter 12, Managing the Product Line.
This slide shows the Marketing Roadmap , highlighting Marketing Imperative 4 -- Design the Marketing Offer.
The Old Way -- New Way identifies the evolution of issues concerning Managing the Product Line.
This slide illustrates the underpinning for the product portfolio material that follows by using Gap Analysis . Stated simply, the figure shows a time axis and a performance axis. The firm currently operates in several product-markets depicted as X, Y and Z. If the firm continues to execute its current product-market strategy it can expect some level of performance depicted by the momentum line . However, we assume that the objective for the firm has a different, and higher, objective line . We typically ask students what factors would increase the distance between the objective line and the momentum line. The answer is environmental change. If the environment is stable and the firm keeps on truckin’, the objective line and the momentum line might be similar. The more the environment changes, the lees likely that the two lines will be close together. We then ask students how they would characterize the current environment. They typically say that it is becoming more and more unpredictable. Hence, the gaps are likely to become greater. This analysis frames the firm’s problem -- how to close the gap.
This slide follows from the gap analysis slide. To close performance gaps and attain performance objectives requires investment. Essentially, the firm has four broad choices for investment -- market penetration, new markets and segments and/or new products, and new businesses. The key question for the firm is which opportunities to choose. The essential problem is how to make these choices.
This slide discusses some fundamental issues about a product portfolio. First, it defines the product portfolio simply as a collection of products. The slide also shows that the product portfolio must be balanced, and identifies some of the dimension across which balancing is important. Finally, the slide gets students ready for the material that follows by stating that there are two approaches to portfolio balancing -- financial analysis and portfolio analysis.
Key Ideas -- Product Portfolio
This slide shows a variety of financial analysis approaches for making investment decisions. Students should be familiar with these approaches from their finance classes. In this chapter we treat these methods in a fairly cursory manner -- students can gain in depth understanding from any decent introductory finance textbook.
This slide shows some of the advantages and disadvantages of financial analysis techniques. Because of the disadvantages, we need a different framework to approach the investment decision problem. The approach we introduce shortly is portfolio analysis.
This chart shows the hockey stick problem for financial analysis. The fundamental issue is that the further out in time for the estimate, the more uncertain that estimate. Since the initial forecasts are generally made by executives that have a personal investment in the project, they are likely to be optimistic about future sales. Hence, there is a tendency to hockey stick the revenue forecasts upwards. Because of the inherent uncertainly, there are often no good arguments to contradict. Hence, investments are approved that perhaps should not be approved.
Key Ideas -- Financial Analysis
This slide shows that no matter what type of portfolio analysis the firm uses -- there are two overarching dimensions. The issue in using different forms of portfolio analysis is how to operationalize these two dimensions. The chart shows how to use these two dimensions. We typically place market attractiveness on the y-axis running from low to high. Relative ability is on the x-axis but analysts use both forms of directionality. In this chart, relative ability runs high to low -- this is the reverse of a typical x-axis. We show the chart in this form because we are about to discuss the growth/share matrix which has always used the x-axis this way. When we get to the multifactor matrix, we shall reverse the scale and use the traditional x-axis direction.
This chart simply illustrates that the firm can use portfolio approaches at different levels -- n particular at the product level and business level.
This chart sets the stage for introducing portfolio analysis by comparing financial analysis techniques for making investment decisions with portfolio analysis techniques.
Key Ideas -- Portfolio Analysis
This slide simply states that there are two broad approaches to portfolio analysis -- the growth/share matrix and the multifactor matrix.
This chart shows the growth/share matrix. Note that this is similar to the general portfolio on the previous slide. In the growth/share matrix: Market attractiveness is measured by forecast market growth rate; Relative ability is measured by relative market share -- we explain relative market share in the next slide The slide also shows that the cut line between high and low is typically set at a relative market share of 1.5.
This slide shows the definition of relative market share (RMS) as developed by The Boston Consulting Group -- developers of the growth/share matrix. Very simply, RMS is the firm’s market share divided by the market share of its nearest competitor. Essentially, RMS is a measure of relative competitive strength.
This slide shows an illustration of the growth share matrix Note that there are entries in each of the four matrix cells. A good exercise for students is to ask them to speculate about the characteristics of products (or businesses) in each cell of the matrix. This is a useful device for eliciting the four product types -- cash cows, dogs, stars, and problem children (question marks, lottery tickets, or wildcats).
This slide highlights the typical characteristics of products in each of the four cells in the growth/share matrix.
This slide shows typical market share/profitability relationships from the PIMS study. The results are generally supportive of the conceptual material from the growth share matrix -- for the RMS axis. As market share increases, RO:I also increases.
This slide shows actual data for a Fortune 500 firm.
This slide identifies several issues with which the firm should be concerned when implementing the growth/share matrix.
This slide illustrates a multifactor portfolio matrix. This is the identical chart to that introduced in Chapter 8 for selecting market segments to target. In this chapter the focus in on the firm’s various products (or businesses).
This slide compares and contrasts the growth/share matrix with the multifactor matrix.
This slide is a disguised company portfolio.
This is a summary slide about portfolio analysis.
This slide contains some summary comments about applying the portfolio concept.
Key Ideas -- growth/share and multifactor matrices
The previous material focused on inter-relations among products that was focused on the firm’s resources -- viz resources that support one product cannot support another product. This slide identifies other types of inter-relationships: Inter-relationships at the customer may demonstrate either positive complementarity or negative complementarity. Inter-relationships at the firm concern either strategic roles or relationships among organizational units.
Key Ideas -- product inter-relationships
The breadth of the firm’s product line is a critical issue. For this reason, we devote several text pages to discussing the topic. This slide shows the subheadings under the topic product-line breadth. The chapter discusses several issues related to each sub-heading.
This slide emphasizes that ROS is only one part of the ROI equation,
This slide and those that follow illustrate a mindless product deletion decision.
This slide is one of several that illustrates a mindless product deletion decision.
This slide is one of several that illustrates a mindless product deletion decision.
This slide is one of several that illustrates a mindless product deletion decision.
This slide identifies several candidate criteria for making a product deletion decision.
Key Ideas -- Product-Line Breadth
Key Ideas -- Product Deletion
This slide highlights several additional product line issues. In particular, we focus on quality, showing empirical results of different quality levels, and The Total Quality Chart as a way to improve quality.
This slide shows an empirical relationship between product quality and profitability.
This slide presents the Total Quality Chart.
This slide identifies several additional product line issues -- we just discussed breadth of the product line. There is extensive discussion of these issues in the chapter. A useful way to enter these topics is to ask students what other issues the firm should consider other than product inter-relationships and product-line breadth. Some students will find it surprising that there are so many issues. Note that we also briefly touch on bundling . We discuss this topic also under pricing in Chapter 19, but it is important to touch on it in this chapter, as bundling concerns the manner in which products are offered for sale to customers.
This slide identifies several additional product line issues -- we just discussed breadth of the product line. There is extensive discussion of these issues in the chapter. A useful way to enter these topics is to ask students what other issues the firm should consider other than product inter-relationships and product-line breadth. Some students will find it surprising that there are so many issues. Note that we also briefly touch on bundling . We discuss this topic also under pricing in Chapter 19, but it is important to touch on it in this chapter, as bundling concerns the manner in which products are offered for sale to customers.
This slide shows the Marketing Roadmap , highlighting Marketing Imperative 4 -- Design the Marketing Offer.
