Description
This is explaining about product strategy.
PRODUCT STRATEGY
How does companies invests in products ?
• Corporate Strategy – Where company is heading over period over time
• Business Strategy
– As a complete unit what is company looking out at this point of time
PRODUCT STRATEGY
How does companies invests in products ? • Investment Objective
– Growth in business – Hold/defend existing position – Turnaround the business – Divest / exit from a particular business
PRODUCT STRATEGY
Techniques For Business Evaluation
• BCG (Boston Consulting Group) Matrix : Approach focuses on Relative Market Share & Market Growth Rate • General Electric’s Business Screen : Focuses on Industry Attractiveness and Companies position in Industry • Directional Policy Matrix : Focuses on sector profitability & company’s competitive capabilities
PRODUCT STRATEGY
• BCG GENESIS ( Bruce Anderson started exercise)
– Westinghouse wanted to know why per unit costs are decline when company gained experience in Manufacturing Products – This lead to an EXPERIENCE CURVE as a derivative of LEARNING CURVE – Diversified Company could have DIVERSIFIED RISKS and OPTIMISE Performance of Entire Organisation by managing part of their Business as they would as Portfolio of Investment
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY
• STRATEGIC BUSINESS UNIT ( SBU)
– A way of organising a business so that each unit sells an identifiable set of products to an identifiable set of customers in competition with identical set of competitors – SBU’s are managed independently with their own set of objectives. Resources, costs & Profits are attributed to each unit separately.
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY
• SBU FOCUS
EXTERNAL FOCUS – organized around Markets & Customers – a clearly defined market with identifiable set of products – products in different SBU’s may share same Production Facility IDENTIFIABLE COMPETITORS – which market ? which size of competition ?
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY
• SBU FOCUS (cont.)
AUTONOMOUS PROFIT CENTRE DISTINCT MARKETING STRATEGIES – e.g. Push Strategy , Pull Strategy etc. SEPARATE ACCOUNTING – i.e. a Separate Profit Centre
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• EXPERIENCE EFFECTS
– cost lowers thro’ experience. Experience is gained thro’ increasing sales volume over period of time. Sources of Experience Effects – The Learning Curve ; – Process Innovations – Specialisation of Labour ; – Handling New Raw Material – Product Standardisation ; – Product Redesign(e.g.BPR) MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• BCG STARTEGY LOGIC
HIGH MARKET GROWTH MARKET SHARE GAINS ACCUMULATED EXPERIENCE
LOWER COSTS THAN COMPETITORS
HIGHER PROFITS
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• OBJECTIVES OF BCG (SHARE GROWTH) MATRIX
– To optimise the performance of Entire Portfolio of Businesses in which company competes – To balance the Cash Flow among those businesses designating some products as SOURCES of funds and some as USERS of funds
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• SHARE GROWTH MATRIX ANALYSIS..
– A balanced portfolio – Establishment to Trends – Competitive Evaluation – Market Growth V/s Sustainable Growth – Financial Analysis
PRODUCT STRATEGY - BCG
• BCG ANALYSIS - Assumptions
– More Experience in Production & Marketing will lower the cost of Product – There is a definite co-relation between Market Share & Long Term Profitability • Portfolio Analysis is stressing the needs for collective evaluation of products ; avoids the trap of considering each product of business in isolation (on its own merit)
PRODUCT STRATEGY - BCG
• DIMENSIONS OF BCG MATRIX
– Simple 2 X 2 Matrix based on • Mkt Growth( Proxy for PLC) And Mkt. Share ( Indicator for Profit) – BCG uses concept of Relative Market Share ( I.e. Co.’s Sale as against Market Leaders Sale in a particular segment) – Relative market share is indicator of efforts required to gain or hold market share – Third Dimension - Size of Market with Bubbles of Different sizes. Larger bubble, Larger Market Share. Sales Contribution of that product to company’s profit ( sum of all bubbles is 100%)
PRODUCT STRATEGY - BCG
• SHARE GROWTH MATRIX
HIGH
MARKET GROWTH
PROBLEM CHILD DOGS
LOW
STARS CASH COW
HIGH
Relative Market Share
PRODUCT STRATEGY - BCG
• A DYNAMIC ANALYSIS – can be used for dynamic more than static conditions – Vertical Movements means changes in market conditions – Horizontal Movements means changes in Company Strategy – By forecasting movements of markets and results of strategic choices for each of those markets company can access in future.
PRODUCT STRATEGY - BCG
• BCG Matrix Analysis
Category Sources of Funds Needs for Funds Cash Balance
P.C. STARS C.C. DOGS
Low High High Low
High High Low Low
- ve In Need Zero Balance + ve Balance Zero to - ve
• CRITICISMS OF BCG MATRIX
PRODUCT STRATEGY - BCG
• No guaranteed Cost Reduction. It requires Concentrated efforts/ pressure • Assumed cost reductions presupposes stability in product design and non-erratic production rates • Are we right in assuming competitor cost structures are alike ? • Effects of Technology
– Assumption on Experience Effects
– Assumption on Market Share & profitability not valid for
• success stories of low share firms • success of low growth market • futility of market share gains
– BCG says - DOGs are for Harvesting
• It may be wise to divest a STAR if it does not fit the main thrust of business or may be too small to worth keeping • Destruction of Bread Winners • Need for Industry specific knowledge essential for rational decisions
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGIES
STRATEGY STARS FOR PORTFOLIO
1. STRTEGIC THRUST Invest for Growth
CASH COWS
Maintain Mkt. Position (against severe competition) > Cash Earnings Maintain or Milk for Earnings Limit fixed Investment
DOGS
PROBLEM CHILD
Manage for Cash Opportunistic (Don't get into Cash Development -ve situation) Forego Share for Profits Invest Selectively in Share
2. MARKET SHARE 3. INVESTMENT
Maintain or Dominate Fund Growth
Minimise or Divest Fund Growth
Reduce in 4. WORKING CAPITAL Process, Extend Credit 5. PRODUCT Differentiation , Line Expansion
Tighten Credit, Reduce Aggressively Receivables, More Reduce Inventory Turnover
Invest
Prune Less Successful, Differentiation, Line Differentiate in Key Aggressive Pruning Extention segments Raise Aggressive, Price for Share gains Aggressive Marketing Selective Coverage
6. PRICE
Lead, Aggressive Stabilise Price / Raise pricing for Share thro' Differentiation Aggressive Marketing Broaden Distribution Limit Hold Wide Distribution
7. PROMOTION 8. DISTRIBUTION
Minimise Slow Withdrawal
PRODUCT STRATEGIES
STRATEGY STARS FUNCTIONAL STRATEGIES
1. PRODUCTION Expand, Invest
CASH COWS
Maximise Capacity Utilisation
DOGS
PROBLEM CHILD
Free Up capacity
Invest
2. R & D
Expand, Invest
Focus on Cost Saving None Projects Cut Back orgainsation
Invest on Differentiated Areas
3. PERSONNEL
Maintain Reward Upgrade Mgt, In key efficiency, Tighten Functional Areas Organisation Tight Control go for Scale economics Emphasise cost reduction through variable costs
Invest
4. COST CONTROL
Aggressively Tight but not at the Reduce both Fixed Expense of & Variable Costs Entrepreuneurship
PORTFOLIO STRATEGIES
- CAN BE GROUPED AT 3 LEVELS 1. MANAGEMENT : - Strategic Thrust, Mkt. Share, Investment, Working Capital 2. MARKETING : - Product , Price , Promotion , Distribution 3. FUNCTIONAL : - R & D , Production , Personnel , Cost Control
PRODUCT STRATEGIES
• DESIRED BUSINESS MOVEMENT
HIGH
MARKET GROWTH RATE
PROBLEM CHILD DOGS
LOW
STARS CASH COW
HIGH
Relative Market Share
PRODUCT STRATEGIES
• CORRECT CASH INVESTMENT
HIGH
MARKET GROWTH RATE
PROBLEM CHILD DOGS
LOW
STARS CASH COW
Dividend
HIGH
Relative Market Share
doc_828588393.ppt
This is explaining about product strategy.
PRODUCT STRATEGY
How does companies invests in products ?
• Corporate Strategy – Where company is heading over period over time
• Business Strategy
– As a complete unit what is company looking out at this point of time
PRODUCT STRATEGY
How does companies invests in products ? • Investment Objective
– Growth in business – Hold/defend existing position – Turnaround the business – Divest / exit from a particular business
PRODUCT STRATEGY
Techniques For Business Evaluation
• BCG (Boston Consulting Group) Matrix : Approach focuses on Relative Market Share & Market Growth Rate • General Electric’s Business Screen : Focuses on Industry Attractiveness and Companies position in Industry • Directional Policy Matrix : Focuses on sector profitability & company’s competitive capabilities
PRODUCT STRATEGY
• BCG GENESIS ( Bruce Anderson started exercise)
– Westinghouse wanted to know why per unit costs are decline when company gained experience in Manufacturing Products – This lead to an EXPERIENCE CURVE as a derivative of LEARNING CURVE – Diversified Company could have DIVERSIFIED RISKS and OPTIMISE Performance of Entire Organisation by managing part of their Business as they would as Portfolio of Investment
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY
• STRATEGIC BUSINESS UNIT ( SBU)
– A way of organising a business so that each unit sells an identifiable set of products to an identifiable set of customers in competition with identical set of competitors – SBU’s are managed independently with their own set of objectives. Resources, costs & Profits are attributed to each unit separately.
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY
• SBU FOCUS
EXTERNAL FOCUS – organized around Markets & Customers – a clearly defined market with identifiable set of products – products in different SBU’s may share same Production Facility IDENTIFIABLE COMPETITORS – which market ? which size of competition ?
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY
• SBU FOCUS (cont.)
AUTONOMOUS PROFIT CENTRE DISTINCT MARKETING STRATEGIES – e.g. Push Strategy , Pull Strategy etc. SEPARATE ACCOUNTING – i.e. a Separate Profit Centre
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• EXPERIENCE EFFECTS
– cost lowers thro’ experience. Experience is gained thro’ increasing sales volume over period of time. Sources of Experience Effects – The Learning Curve ; – Process Innovations – Specialisation of Labour ; – Handling New Raw Material – Product Standardisation ; – Product Redesign(e.g.BPR) MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• BCG STARTEGY LOGIC
HIGH MARKET GROWTH MARKET SHARE GAINS ACCUMULATED EXPERIENCE
LOWER COSTS THAN COMPETITORS
HIGHER PROFITS
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• OBJECTIVES OF BCG (SHARE GROWTH) MATRIX
– To optimise the performance of Entire Portfolio of Businesses in which company competes – To balance the Cash Flow among those businesses designating some products as SOURCES of funds and some as USERS of funds
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGY - BCG
• SHARE GROWTH MATRIX ANALYSIS..
– A balanced portfolio – Establishment to Trends – Competitive Evaluation – Market Growth V/s Sustainable Growth – Financial Analysis
PRODUCT STRATEGY - BCG
• BCG ANALYSIS - Assumptions
– More Experience in Production & Marketing will lower the cost of Product – There is a definite co-relation between Market Share & Long Term Profitability • Portfolio Analysis is stressing the needs for collective evaluation of products ; avoids the trap of considering each product of business in isolation (on its own merit)
PRODUCT STRATEGY - BCG
• DIMENSIONS OF BCG MATRIX
– Simple 2 X 2 Matrix based on • Mkt Growth( Proxy for PLC) And Mkt. Share ( Indicator for Profit) – BCG uses concept of Relative Market Share ( I.e. Co.’s Sale as against Market Leaders Sale in a particular segment) – Relative market share is indicator of efforts required to gain or hold market share – Third Dimension - Size of Market with Bubbles of Different sizes. Larger bubble, Larger Market Share. Sales Contribution of that product to company’s profit ( sum of all bubbles is 100%)
PRODUCT STRATEGY - BCG
• SHARE GROWTH MATRIX
HIGH
MARKET GROWTH
PROBLEM CHILD DOGS
LOW
STARS CASH COW
HIGH
Relative Market Share
PRODUCT STRATEGY - BCG
• A DYNAMIC ANALYSIS – can be used for dynamic more than static conditions – Vertical Movements means changes in market conditions – Horizontal Movements means changes in Company Strategy – By forecasting movements of markets and results of strategic choices for each of those markets company can access in future.
PRODUCT STRATEGY - BCG
• BCG Matrix Analysis
Category Sources of Funds Needs for Funds Cash Balance
P.C. STARS C.C. DOGS
Low High High Low
High High Low Low
- ve In Need Zero Balance + ve Balance Zero to - ve
• CRITICISMS OF BCG MATRIX
PRODUCT STRATEGY - BCG
• No guaranteed Cost Reduction. It requires Concentrated efforts/ pressure • Assumed cost reductions presupposes stability in product design and non-erratic production rates • Are we right in assuming competitor cost structures are alike ? • Effects of Technology
– Assumption on Experience Effects
– Assumption on Market Share & profitability not valid for
• success stories of low share firms • success of low growth market • futility of market share gains
– BCG says - DOGs are for Harvesting
• It may be wise to divest a STAR if it does not fit the main thrust of business or may be too small to worth keeping • Destruction of Bread Winners • Need for Industry specific knowledge essential for rational decisions
MANAGING MARKETING PROGRAMS
PRODUCT STRATEGIES
STRATEGY STARS FOR PORTFOLIO
1. STRTEGIC THRUST Invest for Growth
CASH COWS
Maintain Mkt. Position (against severe competition) > Cash Earnings Maintain or Milk for Earnings Limit fixed Investment
DOGS
PROBLEM CHILD
Manage for Cash Opportunistic (Don't get into Cash Development -ve situation) Forego Share for Profits Invest Selectively in Share
2. MARKET SHARE 3. INVESTMENT
Maintain or Dominate Fund Growth
Minimise or Divest Fund Growth
Reduce in 4. WORKING CAPITAL Process, Extend Credit 5. PRODUCT Differentiation , Line Expansion
Tighten Credit, Reduce Aggressively Receivables, More Reduce Inventory Turnover
Invest
Prune Less Successful, Differentiation, Line Differentiate in Key Aggressive Pruning Extention segments Raise Aggressive, Price for Share gains Aggressive Marketing Selective Coverage
6. PRICE
Lead, Aggressive Stabilise Price / Raise pricing for Share thro' Differentiation Aggressive Marketing Broaden Distribution Limit Hold Wide Distribution
7. PROMOTION 8. DISTRIBUTION
Minimise Slow Withdrawal
PRODUCT STRATEGIES
STRATEGY STARS FUNCTIONAL STRATEGIES
1. PRODUCTION Expand, Invest
CASH COWS
Maximise Capacity Utilisation
DOGS
PROBLEM CHILD
Free Up capacity
Invest
2. R & D
Expand, Invest
Focus on Cost Saving None Projects Cut Back orgainsation
Invest on Differentiated Areas
3. PERSONNEL
Maintain Reward Upgrade Mgt, In key efficiency, Tighten Functional Areas Organisation Tight Control go for Scale economics Emphasise cost reduction through variable costs
Invest
4. COST CONTROL
Aggressively Tight but not at the Reduce both Fixed Expense of & Variable Costs Entrepreuneurship
PORTFOLIO STRATEGIES
- CAN BE GROUPED AT 3 LEVELS 1. MANAGEMENT : - Strategic Thrust, Mkt. Share, Investment, Working Capital 2. MARKETING : - Product , Price , Promotion , Distribution 3. FUNCTIONAL : - R & D , Production , Personnel , Cost Control
PRODUCT STRATEGIES
• DESIRED BUSINESS MOVEMENT
HIGH
MARKET GROWTH RATE
PROBLEM CHILD DOGS
LOW
STARS CASH COW
HIGH
Relative Market Share
PRODUCT STRATEGIES
• CORRECT CASH INVESTMENT
HIGH
MARKET GROWTH RATE
PROBLEM CHILD DOGS
LOW
STARS CASH COW
Dividend
HIGH
Relative Market Share
doc_828588393.ppt