MKTM028 Strategic Marketing MBA Product Lifecycle Management
Questions:
To demonstrate your learning and application with reference to academic literature, explore the concept of product portfolio management, using appropriate marketing models applied to products from two companies of your choice, in a country of your choice. You may choose two companies from this list, or two companies of your own choosing:
Apple Inc Kelloggs
Unilever Proctor & Gamble
Nestle Sony
Indicate how any company could apply the concepts around portfolio management, making generic recommendations.
You are required to produce an essay that demonstrates your understanding of key aspects of Strategic Marketing.
The essay should have:
- a sound theoretical and conceptual perspective, containing evidence of critical debate within an appropriate academic literature.
- an effective practical foundation, which makes generic management recommendations.
d)Synthesise complex organisational based information, together with dynamic external data into effective marketing lead strategies
e)Demonstrate an ability to work effectively in a leadership role in order to carry out marketing tasks linking theory to practice
Answers:
Introduction
Portfolio management is a dynamic process of decision making, wherein a company’s range of new product developments is consistently revised and up-to-date. Under this process, novel projects are assessed, chosen and prioritized; existing projects could be de-prioritized, eliminated or accelerated; and resources are apportioned or re-apportioned to running projects. This portfolio decision process is typified by changing and uncertain information, varied opportunities, inter-reliance among projects, multiple strategic considerations and objectives and lastly multiple locations and decision makers (Grewal and Michael, 2010). The present essay discusses about product portfolio management with an analysis of different marketing models. This essay also presents an opportunity available to companies especially Apple and Procter & Gamble who plan to diversify their product line. The underlying objective of the essay is to study the importance of marketing and its philosophy followed by different organizations for the distribution of their goods and services.
Apple Product Portfolio Management
Apple follows some critical steps related to its product portfolio management and the role played by marketing is visible in every step. In the first step Apple conducts a product inventory. Portfolio management pertains to building up a detailed list of all of Apple’s services and products. every product and service be it hardware, software of services like iCloud, iTunes etc. are added to a database and details are included regarding the market share, channel strategy, target market, pricing strategy, positioning strategy, competitive advantage, profitability, buying trends, share of preference, cost to market, sell and support, cost to develop and produce, and sales cycle time. Such information is collected for both current and potential Apple products and services (RDinsights, 2012). Much of this information is marketing department’s responsibility. Once, the company obtains the inventory, it analyzes the information to find out any overlaps and gaps among the goods and services. In the third stage Apple scores and categorizes its products. It is not unusual in this step to acknowledge that the organization might have more products than it can actually support or fund, and many products targeted at the same audience with corresponding va
lue proposition. Hence, once Apple does the inventory and assessment of all its products, it prioritizes its investments. Here, the firm applies a very simple technique which involves creation of a scoring methodology. In this approach, a predetermined criteria i.e. financial returns, product-line coverage, likelihood of success, strategic alignment, technical feasibility, market attractiveness, market place fit, risk and profitability are developed (Broekhof and Godillot, n.d). Again, the customer and market elements comprise majority of the assessment criteria and the marketing team defines this criteria plus the information to be tracked for every Apple product and service. Score and weight are assigned to every criterion. After that a cut-off score is set and then every product i.e. iPhone, iPad, iPod, Mac computers, etc. is assessed against the criterion and provided a score. This approach is also helpful in prioritizing the business value pertaining with every product. The ones with a score less than the cut-off are culled, while the ones with higher score are kept on the list for more scrutiny and management. For example, no one today remembers the original iPad3. This has been discarded from the product portfolio of Apple due to weak revenue performance and non-alignment with the remaining iPad products portfolio and was later on repositioned as the iPad Retina (Steinbrenner, 2013).
Figure 1: BCG Matrix for Apple
(Pearce, 2015)
As is evident from the matrix, on a relative market share base, viewing the unit market share, Apple is the second biggest maker of Smartphones next only to Samsung. The Smartphone market is in its growing stage and resultantly Apple’s Smartphones are plotted as a half a question mark and half a star on the matrix. Nonetheless, if the dollar market share was taken into account then the Smartphone portfolio would have clearly categorized as a star ((Masterson and Pickton, 2010)). However, the same concept of plotting market share growth against relative market share is continued for other portfolios of the company. The MP3 sector, where the company is a market leader, is facing decline because of sales moving to Smartphones instead. In spite of this falling market size, the portfolio of iPod is still categorized as a cash cow. This is because it is still very profitable and its profits can be reinvested in other areas of Apple. The computer division can be categorized as a dog. This implies it is functioning in a mature market and it is comparatively smaller player in that marketplace. Hence, there is not much market potential (Hollensen, 2015). But, as much of the Apple products are co-dependent because they utilize the same operating system and depend on one another’s components – the company would experience its PC segment as holding strategic value in the overall consumer relationship strategy. Apple’s tablet portfolio i.e. the iPad is presently making a transition to a cash cow from a star because the tablet industry is maturing and hence the company will not require making huge reinvestments in this portfolio (Garcia, 2014).
To obtain a better view of Apple’s product portfolio, GE matrix has also been applied to support the BCG matrix.
Figure 2: GE McKinsey matrix
|
|
Strong |
Medium |
Weak |
|
|
Market Attractiveness |
Smartphones and iPads |
iTunes |
|
High |
|
iPods |
PCs and Laptops |
IMac peripherals and software |
Medium | |
|
|
|
|
Low |
Business Strength
It is clear from the above matrix that Apple is at least moderately strong in all its portfolios and most of its products are performing in fast growing and attractive segments like the tablets, smartphones and iPods. The company is not likely to divest any of these portfolios and will use its PC and music products for overall consumer relationship strategy (Martin, 2016).
Proctor & Gamble Product Portfolio Management
Coming to the second organization i.e. Procter & Gamble, its approach to product portfolio management starts with its overall business plan which defines the determined level of R&D investments, resources and associated sales being projected from the products. With multiple product lines and business units, P&G does a strategic allocation process underpinned by its business plan. Such strategic allocation assigns the designated R&D investment into product lines, geographic areas and markets. Once, this is undertaken, then a portfolio outlining is developed encompassing the pertinent portfolio data (Siemens PLM Software, 2009). The company then uses the road mapping technique for its portfolio management. Similar to a physical roadmap, a product roadmap also has a timeframe, destination and a pre-determined route which keeps the entire organization moving in the same direction. This roadmap offers valuable insights and goal setting properties which benefit the company. Rather than developing cumbersome spreadsheets and in-house algorithms, P&G uses multiple models to determine objectives, prioritize activities, align tasks with goals, take the investment decision, administer resource assignment, and monitor the health of the portfolio. It is usual for most companies to think of product roadmaps in context of attributes, however, P&G knows that consumers are not concerned with attributes per se. In fact, they give value to products which can meet their needs (Busuttil, 2014). Hence, when developing a roadmap, P&G talks about the specific problems its consumers have, why they are critical and how its products will resolve these problems. However, the software development team does ask for roadmaps with the range of attributes and dates. In this situation, the company develops a feature centric internal roadmap plus a solution centric external roadmap (Hartog, 2012).
To identify the problems that need to be solved by company’s products, P&G’s marketing department strives to comprehend the changing wants, needs and the untapped needs of its consumers and prospects. A detailed analysis of the 3Cs of the organization is undertaken i.e. customers, competition and the company itself. While doing the customer analysis, the marketing team determines who are the customers of P&G, why do they purchase, why they purchase from P&G etc. This is done so that the firm does not get too busy attempting to meet an existing request, solve a current problem, or add some improved feature to the product, that it does not have its finger on what is actually driving the company and what the real concerns and needs of the consumers are (Rosenbaum, Percy and Pervan, 2015). The second C is competition. The marketing department ensures that the company is not just focused on the same old competitors so that the new ones do not take away its business with their attractive solutions. The last C includes analysis of the organization itself. The marketing team makes sure that the management does not limit attention to its existing products. It considers all those aspects which can both directly and indirectly impact its ability to prosper in a particular market segment. The management is aware that a single organization-wide self-evaluation is not adequate to serve all its markets because a strength of one segment could be a big weakness in another (Bakker, 2014). Once the 3C analysis is done, the marketing team develops the positioning and differentiation strategies which win business. The organization invests sufficient time in this domain so as not to lose any opportunity in its product portfolio management. Resultantly, it does not find itself responding to the current product offerings du jour or price pressures. This plainly showcases that P&G has sufficient understanding and knowledge of its market and customer needs. As it fathoms what factors are driving its consumers and prospects, it then becomes possible to determine where the actual value differentiation opportunities exist. Through this, the organization recognizes delivery approaches which would be profitable for itself and valuable for the customers (Morgan, 2015). Lastly, the marketing team writes down the strategic product plan which would win business. The product portfolio management plan should be the marching order for the overall company. After the due diligence carried out by the marketing team, it then describes exactly what the company is doing, for whom it will do, how it will do and what the outcome will be. Despite the pressures of business environment and the stress of addressing intensified competition, P&G’s product portfolio management plan is not a mere adjustment to previous year’s plan based on earnings and revised sales projections (Chernev, 2014).
The personal care and fabric care segments of Procter and Gamble will be analyzed through BCG matrix because these are the best performing segments in terms of profitability.
Its products like Vicks, Ariel, Tide and Oral-B have reached the stage of maturity and during this phase, R&D is mostly restricted by the company for any further product improvement or modification. This money is instead invested in the products belonging to the star quadrant. This matrix can further be supported by the GE matrix which provides P&G with greater value information for the senior management.
|
|
Strong |
Medium |
Weak |
|
|
Market Attractiveness |
Pantene, Head & Shoulders, Whisper, Pampers |
Olay |
|
High |
|
Ariel, Vicks, Tide, Oral B |
|
|
Medium | |
|
|
|
Ambi-pure |
Low |
Business Strength
Apart from Ambi-pure all the remaining products fall in the growth category and are in a position to generate more returns in the future. Adding new products to the portfolio does not necessarily imply producing them internally. This can also be attained through product acquisition. In fact, the product portfolio management process helps P&G in identifying both divestiture and acquisition prospects. The strategy of acquisition is focused on penetrating new or emerging markets. In 2005, the company added Gillette with its line of grooming products for men with the thought that it could now cater to a complete household. In 2015, P&G took one more critical stance at its whole range of products to divest those in flat or lagging markets. This enabled the business to enhance the Group’s profitability whilst retaining its market dominance (Grünig and Kühn, 2015).
The consistently altering markets with constant game changers and disruptions imply that the organizations ought to have an agile perspective across their businesses. Hence, Procter & Gamble’s operating plans are reviewed regularly all through the year instead of yearly. By getting a strategic overview of all the moving aspects in the business, P&G maintains its edge by its ability to rapidly move the product portfolio in response to a more frequentative planning cycle (Hartog, 2012). Its product portfolio management actively ties strategic innovation planning and road mapping into its NPD process. This enables it to attach its long run strategy with decisions regarding product innovation investments. The operational process of portfolio management is defined within a comprehensive innovation governance system. The reason behind this is that some components of portfolio planning are tied into higher-level planning cycles, whereas some components pertain to governance processes that drive ideation and development (McNally, Durmu?o?lu and Calantone, 2013).
Recommendations
It is easy to fathom that developing a new product and even maintaining an existing one demands some investment. Hence, organizations should leverage portfolio management as a means of making strategic decisions regarding product development and make sure the business is introducing the correct products for the target market. Portfolio management is an essentially a business process which entails development, modification and implementation of an investment strategy which will offer the highest contribution and value to the strategic interest of the company (Otten, Spruit and Helms, 2015). Provided that the success of novel products usually relies on marketing, the marketing team of both Apple and Procter & Gamble must take on a leadership role to evaluate, prioritize and select the optimal product mix. Apart from this, metrics make up the keystone for product portfolio management which offers stakeholders a quantitative assessment they require to make coordinated and informed product decisions. The effectual usage of metrics is usually regarded as a key differential which distinguishes fruitful product portfolio management. A general misconception is that management of product innovation is associated with activities from conception to launch. Maximization of ROI from product innovation demands making decisions at every stage of a product’s lifecycle, i.e. from idea conception through market introduction to retirement (Martinsuo, 2013). However, if the companies fail to think in respect of the complete lifecycle then it would lead to an inability to recognize and remove underperforming products, product cannibalization and product proliferation, all of which is likely to negatively affect the ROI performance of the complete product portfolio. Therefore, it is very important for both Apple and Procter & Gamble to think through the entire lifecycle of their products and determine a product mix which will give the best ROI in short, medium and long run (Grünig and Kühn, 2015). It is thus recommended that for product led organizations like Apple and P&G, product portfolio management strategy must drive the product portfolio breakdown and offer the game plan of how the companies will deliver on the business strategy. Hence, there should be the correct balance of maintenance projects, line extensions, product improvements and new pioneering ideas to meet the short and long-term goals of businesses (Proctor, 2014).
Throughput management which is otherwise known as “pipeline management” could also be used by both the companies. Such management will allow them to effectively implement all work recognized as a New Product Development project. Product portfolio management strategies form an integral process for allocation of resources, specifically for organizations with several products and services. Through bubble graph views, matrix, scoring and road maps, product portfolio management strategies can offer higher flexibility which will help the companies in reducing some of the risks associated with NPD (McNally, Durmu?o?lu and Calantone, 2013). These also recognizes the products which offer the maximum areas for company’s fiscal health, the developing markets with the greatest potential for growth and the products which are a burden to the bottom line. The process of acquiring products could be complex and lengthy, entailing a search for market opportunity, performing extensive historical, financial and operational due diligence on the selected acquisition, and eventually integrating this into the product portfolio. To augment the success of such acquisitions, it is vital to engage The Entire Product Portfolio Management Team In The Whole Process (Prasad, 2016).
Conclusion
As described and demonstrated in this essay, product portfolio management demands discipline. Done effectively, organizations could employ it to select and manage the ideal mix of product investments developed to foster the business capabilities and drive its growth. It is critical to note that portfolio management is different than a project, and is rather a process consisting of tracking the market, screening the investment level, and employing standard criteria to those investments for maintaining the most optimal product mix to attain the strategic initiatives of the business. When effectively implemented, product portfolio management enhances business performance and alignment, mitigates waste, and augments customer satisfaction. With product portfolio management, it becomes easier to comprehend what products are being invested into and why. Marketing has a very strategic role to play here and is accountable for obtaining, tracking, scoring as well as prioritizing requirements and preferences of the customers.
References
Bakker, D., 2014. Vertical Brand Portfolio Management: Strategies for Integrated Brand Management between Manufacturers and Retailers. Springer.
Broekhof, M. and Godillot, B., n.d. How to Manage Innovation as a Business: Understanding the Best Approaches and Tools to Manage the Complexity of Innovation. Oracle.
Busuttil, J., 2014. Product Roadmapping, Prioritisation and Portfolio Management. [Online]. Available through: <https://www.mindtheproduct.com/2014/07/product-roadmapping-prioritisation-portfolio/>. [Accessed on 15 June 2017].
Chernev, A., 2014. P&G's Plan to Ditch Half Its Brands Is Not as Strange as You Think. [Online]. Available through: <https://www.bloomberg.com/news/articles/2014-08-06/why-proctor-and-gamble-is-smart-to-slash-its-product-portfolio>. [Accessed on 15th June 2017].
Garcia, R., 2014. Creating and Marketing New Products and Services. CRC Press.
Grewal, D. and Michael, L., 2010. Marketing. 2nd ed. McGraw Hill.
Grünig, R. and Kühn, R. 2015. Portfolio Analysis. In the Strategy Planning Process. Springer Berlin Heidelberg.
Hartog, E., 2012. Reducing complexity at Procter & Gamble: a complexity approach towards product portfolio management.
Hollensen, S., 2015. Marketing Management: A relationship approach. 3rd ed.
Mallin, M. and Finkle, T., 2011. Apple Inc.: Product Portfolio Analysis. Journal of the International Academy for Case Studies, 17(8).
Martin, 2016. The Apple Product Strategy. [Online]. Available through: <https://www.cleverism.com/apple-product-strategy/>. [Accessed on 15 June 2017].
Martinsuo, M., 2013. Project portfolio management in practice and in context. International Journal of Project Management, 31(6). Pp.794-803.
Masterson, R. and Pickton, D., 2010. Marketing an introduction. SAGE.
McNally, R.C., Durmu?o?lu, S.S. and Calantone, R.J., 2013. New product portfolio management decisions: antecedents and consequences. Journal of Product Innovation Management, 30(2). Pp.245-261.
Morgan, P., 2015. P&G’s Strategies for Revamping its Product Portfolio. [Online]. Available through: <https://marketrealist.com/2015/09/pgs-strategies-revamping-product-portfolio/>. [Accessed on 15th June 2017].
Otten, S., Spruit, M. and Helms, R. 2015. Towards decision analytics in product portfolio management. Decision Analytics, 2(1). P.4.
Pearce, S., 2015. Apple, Inc. The Strategy of Success. [Online]. Available through: <https://stevenwpearce.wordpress.com/2015/06/08/apple-inc-the-strategy-of-success/#_Toc401265585>. [Accessed on 15 June 2017].
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