Portfolio Analysis

5153 Words21 Pages
chapter two

INTRODUCTION Organizations market a mix of products or services or both. These constitute the offering that is made through the strategic window. Central to the success or failure of a business is the health of its product (or service) mix. A starting point is the product life cycle concept. This is a useful conceptual framework within which to study how firms can vary their marketing strategies—though of course as we shall see in later chapters they do have to take other factors into account. There seems to be little doubt, however, that at different stages in the product life cycle certain marketing strategies seem to be more appropriate than others. The life cycle concept also points to the different
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One problem that has been found in trying to make use of the product life cycle concept as a management tool is that many products do not appear to perform in the market place as it suggests. They seem to bypass some stages while getting stuck at other stages. Moreover, they may even come into vogue again after a period of going out of fashion. These observations have brought about criticisms of the product life cycle as a useful planning tool.

EXHIBIT 2.1 SWANSEA ENGINEERING—DIFFICULTIES IN USING THE PRODUCT LIFE CYCLE CONCEPT Swansea Engineering makes wire for industrial uses. Applications range from wire for cables to carry high voltage electricity to wire for winding on small electric motors for incorporation in both industrial and domestic products. The firm has tried to use the life cycle concept to explain generic sales in the market and sales of its own products. Difficulties encountered include the defining of product markets and the separation from natural growth and decline in the market and the effects of recession. Indeed in recent years it has proved extremely difficult to assess exactly where many products and markets are in relationship to their anticipated life cycles. Ironing out the fluctuations caused by economic recessions and mini-booms causes one of the major problems. In
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