Ch11 life cycle and portfolio strategies
4 likes1,814 views
The document discusses strategies for managing a company's portfolio of products and business units over their life cycles. It describes how companies can assess their competitive position and cash flow based on tools like the Boston Matrix and ABC analysis. These analyses help companies determine where to invest, consolidate, harvest or divest their products and business units as industries mature and consolidate over time.
Ch11 life cycle and portfolio strategies
- 1. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns PART 3 STRATEGIES FOR THE ENTREPRENEURIAL ORGANIZATION CHAPTER 11 Life Cycle and Portfolio Strategies
- 2. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns 0 Time Sales value Introduction Low sales Low growth Low profits or losses as costs are high Few competitors Growth Increasing sales Rapid growth High profits as costs come down Competitors emerging & competition intensifying Maturity Static but high sales Static but high profits Focus on cost reduction Fight for market share Established competitors Decline Declining sales Declining profits or losses Competitors exiting The Product Life Cycle
- 3. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Introduction Phase: Elements of Marketing Strategy • Basic product • Price low for repeat purchase where trial is important or price high where novelty or uniqueness is valued, particularly if repeat purchase is infrequent • Promote aggressively • Explain product benefits • Build awareness, encourage early adoption • Selective distribution
- 4. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns 0 Time Sales value Introduction Low sales Low growth Low profits or losses as costs are high Few competitors Growth Increasing sales Rapid growth High profits as costs come down Competitors emerging & competition intensifying Maturity Static but high sales Static but high profits Focus on cost reduction Fight for market share Established competitors Decline Declining sales Declining profits or losses Competitors exiting The Product Life Cycle
- 5. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Introduction Phase: Elements of Marketing Strategy • Basic product • Price low for repeat purchase where trial is important or price high where novelty or uniqueness is valued, particularly if repeat purchase is infrequent • Promote aggressively • Explain product benefits • Build awareness, encourage early adoption • Selective distribution
- 6. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns The Product Life Cycle 0 Time Sales value Introduction Low sales Low growth Low profits or losses as costs are high Few competitors Growth Increasing sales Rapid growth High profits as costs come down Competitors emerging & competition intensifying Maturity Static but high sales Static but high profits Focus on cost reduction Fight for market share Established competitors Decline Declining sales Declining profits or losses Competitors exiting
- 7. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Growth Phase: Elements of Marketing Strategy • Develop product extensions & service levels • Price competitively to combat competition & penetrate market • Promote aggressively • Build brand • Intensive push on distribution • Limited trade discounts
- 8. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns 0 Time Sales value Introduction Low sales Low growth Low profits or losses as costs are high Few competitors Growth Increasing sales Rapid growth High profits as costs come down Competitors emerging & competition intensifying Maturity Static but high sales Static but high profits Focus on cost reduction Fight for market share Established competitors Decline Declining sales Declining profits or losses Competitors exiting The Product Life Cycle
- 9. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Maturity Phase: Elements of Marketing Strategy • Wide range of products but expansion slows • Modify & differentiate product • Develop next generation of product • Price defensively – meeting or beating competition – to ensure maximum return • Emphasise brand • Promote selectively, based on special offers or promotions and trade discounts • Intensive push on distribution
- 10. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns 0 Time Sales value Introduction Low sales Low growth Low profits or losses as costs are high Few competitors Growth Increasing sales Rapid growth High profits as costs come down Competitors emerging & competition intensifying Maturity Static but high sales Static but high profits Focus on cost reduction Fight for market share Established competitors Decline Declining sales Declining profits or losses Competitors exiting The Product Life Cycle
- 11. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Life Cycle and Competitive Position Hold niche Grow with ind. Harvest profit Grow fast Grow fast Attain cost leadership Defend position Attain cost ledshp. Review Defend posn. Renew Grow with industry Find niche Grow with industry Turn-around Consolidate Withdraw Divest Withdraw Grow fast Catch up Differentiate Differentiate Focus Grow with industry Harvest Catch-up Hold niche Focus Grow with industry Differentiate Focus Grow fast Differentiate Grow fast Reduce costs Differentiate Grow with ind. Harvest profit Find niche Grow with ind. Harvest profit Turn around Find niche Consolidate Divest Consolidate Cut costs Start-up Growth Maturity Decline Dominant Strong OK Weak Very weak CompetitivePosition
- 12. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns The Boston MatrixMarket Attractiveness Low Star Problem Child DogCash Cow High Low Market Strength High Decline Maturity Failure Growth Introduction Product/ Servicelaunch
- 13. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns The Boston Matrix Strategy ImplicationsStar CashDog CashCow INVEST FOR GROWTH • Penetrate market • Accept moderate short-term profits • Sell and promote aggressively • Expand geographically • Extend product range • Differentiate product/ service DEVELOP OPPORTUNITIES • Be critical of prospects • Invest heavily in selective products/services • Specialise in strengths • Shore up weaknesses GENERATE CASH • Monitor carefully and judge when to discontinue • Live with low growth • Improve productivity • Reduce costs • Look for ‘easy’ growth segments MANAGE FOR EARNINGS • Maintain market position with successful products/services • Differentiate products/ services to keep share of key segments • Prune less successful products/ services • Stabilise prices, except where a temporarily aggressive stance is required to deter competitors ProblemChild
- 14. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns The Boston Matrix Star Problem Child Cash Cow Dog Niche Commodity Commodity
- 15. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Product Life Cycle Management Star Problem Child Cash Cow Dog Product extensionsProduct expansions Product modifications
- 16. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns The Boston Matrix - Cash Flow Star DogCash Cow Revenue Expenditure Cash flow Revenue Expenditure Cash flow Revenue Expenditure Cash flow Revenue Expenditure Cash flow + + + - - - _________ neutral + - - - _________ - - + + + + - - _________ + + + - _________ neutral Problem Child
- 17. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns ABC Analysis Contribution Low High Class B Class C Class A Sales High Low Low value to the business High value to the business
- 18. Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns Industry Life Cycles and Mergers & Acquisitions Increasing merger, acquisition and alliance activity Phase 1 Low concentration Phase 2 30-45% concentration Phase 3 70% concentration Phase 4 90% concentration Size Time