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 earning patterns of products or services at various points in time. It indicates that it is necessary to have a balanced portfolio of products services in terms of cash generating capabilities in order to ensure steady-sales and profits at all times. Since products will generate different cash flows and profits over their lives it means that the firm has to constantly review its product mix, prune its product lines and introduce new products from time to time in order to maintain long-run profits and stay in business. Examining the nature of the product life cycle concept acts as a good introduction to product portfolio models. Several product portfolio models, perhaps the best known of which are the BCG (Boston Consulting Group) matrix, the GE/McKinsey matrix, and the Directional Policy matrix have been adopted by marketers to aid them assess the health of a firm’s product
mix. This chapter examines the use and limitations of such models. Portfolio models are useful diagnostic tools but more formal and detailed planning mechanisms are required to evolve and evaluate detailed strategies. Consideration of the product life cycle and the various portfolio models is essential when examining the implications of strategic windows for an organization. All these tools and methods give reasonably good indicators of when a strategic window is about to close.
THE PRODUCT LIFE CYCLE The need for new products and new product markets has an important influence on strategy formulation. This is because there is evidence to show that most products have life cycles and progress through recognized stages. Every stage in the life cycle brings with it environmental threats and opportunities that require changes to be made in marketing strategy and have implications for marketing planning. In general, life cycles exhibit the following features: • Products have a finite life span. • The typical product life cycle curve, as reflected in the sales history of a product is ‘S’ shaped until it eventually levels off. It is at this point that market maturity occurs and when the maturity phase has run its course, a period of decline follows. • In general terms, the stages in the life cycle are known as ‘introduction, growth, maturity and decline’. • The life cycle of a product may be prolonged by finding new uses or new users for the product or by getting present users to increase the amount they use. • During its passage through the life cycle, the average profitability per unit of the product sold at first increases and then eventually begins to decline. A typical life cycle of a successful product appears in Figure 2.1. The length of the product life cycle Product life cycles can vary considerably in terms of length. The steam locomotive made its debut in the early 19th century and disappeared from regular service in the UK towards the end of the 1960s. One can still, of course, find enthusiasts using them in the 21st century in the UK and there are parts of the world—for example, Eastern Europe, Africa and China— where the steam locomotive is still in regular commercial use. In contrast, some women’s and men’s clothes come in and out of vogue with amazing alacrity. They can even...