Exploring Product Portfolio Management In Marketing: Models And Industry Examples

BCG Matrix

The term marketing can be defined as the actions that are performed by the business entities and the organizations to promote their brand. Marketing is the process by which the companies try to attract the attention of the customer towards their product or service. (Proctor 2014). Many of the different organizations have started as single product but slowly evolved itself into a multinational company. Managing and providing a number of different products to the customers does not ensure the similarity of the of the product life cycle of different products. The different business organizations operate in a competitive environment which is quite different from each other. The market growth opportunities also differ from each other and every organization formulates special strategies to achieve the set goals and objectives. Portfolio decisions are considered to be the ultimate while formulating the strategies of the organization. A number of different portfolio models are present which provides a clear analysis of the product portfolio models. These are namely;

1. Shell Directional Policy Matrix
2. BCG Matrix
3. GE Matrix/McKinsey Matrix

BCG Matrix or Boston Consulting Group was developed by Mr. Bruce D. Henderson in the beginning of the 1960’s. It is believed to be on the business to analyze the different SMU’s. The framework is concerned with the cash generation and its use in the business.

1. Cash Cow-The business with high market share and a low growth rate falls under the following category. This kind of product has a very strong market presence and market hold. The profit making business of a company or the products that garner the maximum possible profits for the organization. The products under this part enjoy both the leadership as well as the economies of scale. The lower rate of market growth doubles their capabilities to use very little cash than the other products of the market. The cash amount generated in the business is used invest in other business of the company. The main objective of Cash Cow is about holding the competitive edge in the market as well as keeping the market shares intact.
2. Stars-The products or the business organizations of this particular segment are believed to be the leaders in the market.  High market rate and high percentage of growth rate is the main characteristics of this products or brands in the market. The main two strategies for Star products are the existing shares of the market and to acquire a greater market share to be able to maintain a proper competitive advantage in the market. A star product turns into a cash cow as soon as it reaches the saturation point.
3. Dog- The business units or the products that fall under the following category have a very low growth rate along with a very much low market share. The following entities face very long term cost possibilities and a considerable amount of cost disadvantage.
4. Question Mark-The businesses which have a very low market share with high growth rate are settled in the question mark block of the BCG Matrix. According to The following kinds of business can be termed as wild cats. The expected strategy for these firms is to follow the ways of market development which may turn the product and the business into cash cows. Absence of proper activity and shortage of cash turns these products into dogs.

BCG Matrix is one of the most widely accepted tools in the market. The advantages as well as the disadvantages of the Matrix are as follows;

1. The BCG model is very simple and easy to formulate. The simplicity of the particular Matrix raises its acceptance levels.
2. The BCG model is used to distribute the right kind of resources to the firms. The strategic positions of the business models are understood using the following set of model. The matrix also prepares a proper base for the management where the firms can formulate and implement their own set of future actions.
3. The model is useful to allocate the resources of the business units to the areas where it is concerned and accordingly the firms wants the advantages of the experience curve and gain a healthy market share.
4. The information regarding the investment options and the support of business entities are provided using the following model and the following matrix is useful for all sorts of companies starting from large scale to small scale companies.

The limitations of the following matrix are as follows;

1. The use of Relative market share and market growth rate is believed to be very narrow in their approach in comparison to the things that are being measured.
2. The matrix usually caters to the needs of large scale companies that are involved in huge scale manufacturing or production business. The matrix ddoes not cater to the needs of small scale uni product companies.
3. The four segmentation of the matrix is a bit confusing as for example dog refers to the products that are being divested but actually it refers to the business making less money with a very limited amount of growth.

Management Company McKinsey and Company in collaboration with the General Electric Corporation developed the GE McKinsey Matrix to use it as a product portfolio planning tool. The main aim of creating such a tool was to overcome the limitations of the BCG Matrix. The move was also aimed to create a tool for assessing different business units with the aim of financing the plan with the best future. The following matrix is plotted as a two dimensional grid similar to the BCG Matrix. The following model is involved in dealing with the various methods to determine various business units in contrast to the BCG which has only two criterions that is relative market share and market growth rate. The business in the following framework is assembled under two different dimensions namely; the competitive position which is horizontal and the industry attractiveness which is vertical. According to West (2015) that it is needed to consider the following factors only when they are appropriate and related to the industry. The cells are pitted with different weights which helps the researcher to analyze the model easily.

Difficulties such as recognizing factors relevant to both the business strengths and attractiveness occur only when the multi factor matrix comes into action. The presence of nine different boxes has had a significant impact on the model as it is also divided into three different parameters namely high, medium and low.

1. The increase in the number of segmentations is one of the main advantages of the GE matrix. It consists of 9 different cells in comparison to the four cells of BCG Matrix.
2. The presence of the additional five cells in comparison to the BCG Matrix helps the organization to place its products
3. The users are allowed to use the business criterion for both the business strengths and the industry attractiveness. Both the values are measured by using a number of different factors.

The limitations of the following matrix are;

1. It can turn complex and complicated as soon as there is a growth of the business.
2. Both the industry attractiveness and business strength are subjective matters that vary from one person to the other.
3. Factors like market competitiveness and competitive edge in the market may turn out to be key factors for one situation and sometimes the level of importance may change as a result. Thus it can be said that there are no fixed parameters by which every business can be judged.
4. The matrix does not help in distributing the investments for every single product in the market.

The researcher has taken the help of three different frameworks to get to the basics of Product Portfolio Management. The first figure provided in the conceptual framework has been the BCG matrix. The BCG matrix was prepared by the Boston Consulting Group to determine the planning done by the organization to get an idea of the different portfolio of the products that are prepared by the company to innovate and develop them (Prasad 2016). It is believed that product portfolio is the combination of the function that determines the cash flow (West et al. 2015). High growth products require the cash inputs to grow whereas a decrease in the growth products makes sure of generating excess finance. A growth in the market share requires a proper cash inflow to finance different assets that are bought by the company to expand the business. The extra cash is required to keep the shares of the company within their fold. Products do not have a long lifespan and have generally a stipulated time period for its growth. The cash which has once been invested cannot be put into use another time. The generated cash and is a function of the market share. High market share and high margins runs together parallel. The experience curve effect of the BCG matrix explains the following point.

Advantages and Limitations of BCG Matrix

The Coca Cola Company was established in the year 1886 by Mr. John Pemberton in Georgia, USA. The company produces soft drinks, fruit juices, mineral water, sports drink, tea and many other different kinds of drinks across the world. The company generated annual revenue of around $41.863 billion in the year 2016. It employs more than 123,200 numbers of people across the globe. Among the huge number of different products not all ensures profit in the market as some of them incurs huge loss.  The construction of the BCG and the GE matrix will be helpful for the readers to get an idea on which of the products can be divested by the organization.

Question Marks- The products of Coca Cola with a very high growth rate but a low market share come under the question mark part of the BCG Matrix. The figure of the BCG Matrix of the mentioned soft drink company shows that Limca and Fanta are the two soft drinks that are believed to be question mark products. A few years back there was a misleading fact on Sprite which said that the soft drink contains a small amount of alcohol. This had a huge impact on the sales of the soft drink as the sales were affected badly. The company acted promptly and recalled all the products from the market and restricted the amount of loss. The Company sends all the samples to the laboratories and testing centers to ensure that the product was absolutely ok. The prompt action taken by the management of Coca Cola stopped the soft drinks from entering into the dog category.

Stars- The brand of products that have a high growth rate along with a very high volume of market share falls under the Star category products. The trend of the ever increasing market size, demand of the products by the customers and to lead a healthy lifestyle has promoted the likes of Kinley mineral water and some health drinks as well. Kinley has been one of the pioneers of mineral waters since its introduction in the market. Nowadays almost every person wants to stay fit and healthy which in turn has increased the rise of sales of the following brand of mineral water.

Dogs- The products that have reached the maturity stage are kept in the category of dogs. The growth rate for the products is very slow. Diet Coke was designed specifically to cater the needs of the people having diabetes and other ailments. The product though showed some good sales figures in the beginning turned out to be a failure after some time as the sales rate fell drastically. The failure of the brand to reach the expected levels made it a difficult proposition for the company to introduce it in a new outlook. The company eventually decided to divest it. Business units under the dog category can earn profits but cannot be termed as a high profit generating source.

Cash Cows- These are the products with a very low growth rate in the market but the products tend to have a high rate of market share. The brand Coca Cola and Limca can be considered as the cash cows of the company. Both the products have provided the company with huge sales since its inception in the market. Though the products have reached the maturity level with the advent of years but the sales of the products have remained healthy. Both the mentioned brands have seen a growth in the sales in the recently concluded financial year.

INVEST?GROW · Thums up · Coke
	SELECTIVITY/EARNINGS · Kinley,  Limca · Sprite
		DIVEST/HARVEST · Diet Coke, Fanta

HIGH

MEDIUM

LOW

GE Matrix

HIGH

MEDIUM

LOW

1. Grow-Thums Up and Coke are the main products that falls under this particular category.  Coke has a high level of industry attractiveness which has helped it to gain a strategic competitive advantage in the market. The product is available in the leading markets of the globe and has a high demand in some countries. The company must have the aim to protect the leadership status of the following brand of soft drink and thus must concentrate on maintaining strength. Thums Up on the other hand has a medium range of competitive advantage but has a high level of industry attractiveness. Therefore Thums up should concentrate more on building its brand value on some selective range of strengths.
2. Hold-The hold section in the GE Matrix of Coca Cola company consists of products like Kinley Mineral Water, Limca and Sprite.Kinley mineral water is quite reputed in the market and has a medium industry attractiveness and similarly a mediocre competitive position (Payne and Frow 2014). The management of the company has emphasized that to promote the brand the company has to focus more in the areas having high profits with very low risk factors.  Limca and Sprite on the other hand have high level industry attractiveness as well as a weak competitive position in the market. The company has decided to focus on building selectively by specializing on different strengths (Shanbhag et al. 2016). Lack of sustainable growing environment will force the company to pull the two mentioned products out of the market.   
3. Divest-Diet Coke falls under the following sector. As mentioned earlier the product had a good opening in the beginning but the sales figure gradually became mediocre. The product has a Low Industry Attractiveness and medium competitive position must shield their position in the profitable segments of the market. The company must upgrade the following product and should put a cap on the scope of further investments in the following sector. As per some of the annual reports of the company Diet Coke failed to achieve the desired results in the market.

1. Question Mark-As said earlier the product with low market share but a considerably high growth rate falls under the following category. Apple PC’s has been categorized as a question mark product as chances of profits are uncertain for these particular products (Klingebiel and Rammer 2014). The lack of investment in the middle stages of the product development hampered the cause of the product and impacted the sales. The huge growth in the competition of the market created huge problems for the product.
2. Star- Asmentioned earlier the products with a high growth rate as well as a high market share falls under this categories. The brands that are considered to be the star products of the company are I-phone and tablet pc’s which has seen huge sales across the world. The product has been able to woo the customers as it offers a totally different innovative technology to them. The popularity of the products has reached at the maturity levels and it can easily become a cash cow at any moment.
3. Pets- As mentioned earlier in the BCG matrix of Coca Cola these are the products that have a very low market share and a very slow growth rate in the market. Apple TV is such a product of the mentioned technological company which has never been successful as such. The brand was introduced for a niche group of customers but it failed to attract a large portion of the selected group. The company has decided to divest the product as the chances of the product being able to increase their sales and expand their business unit are almost impossible.
4. Cash Cows- The products with a very low market share and low growth rate fall under this category.  I-Phones and I-pod are termed in this following category. Both the products are in the maturity stage as both of them have shown excellent sales figures. The cash cows are the main sources of revenue for the individuals as because it does not lose the competitive edge in the market though they have reached the matured stage.

INVEST?GROW · I- Phone · I Pad
	SELECTIVITY/EARNINGS · Apple Watch · Macintosh
		DIVEST/HARVEST · Keynote · Apple TV

HIGH

MEDIUM

LOW

1. Grow- Different brands such as I Phone, I pad and tablets have high market attractiveness and enjoy a high rate of competitive advantage. High industry attractiveness makes the products achieve sustainability. The company must concentrate on building a selective strength to maintain its competitive advantage.
2. Hold-Mackintosh which is Apple’s own innovative system software and Apple smart watch falls under this category. The management of the company must focus on expanding the brand name and the product by investing in areas where risks are comparatively low but the profit margins are very high.  
3. Divest- Apple TV is one such product that needs to be divested as the company has been unable to carry on with the particular product in the absence of funding and proper interest by the consumers for these products.

The GE Matrix of Coca-Cola and Apple were prepared by the researcher based on the Market Attractiveness and Business Strength (Proctor 2014). The researcher has separately conducted the GE Matrix for Coca Cola and Apple in a tabular form.

The Market Attractiveness of both the companies are thus deduced by using GE Matrix. The conduction of the GE Matrix thus helps the researcher to gain the industry attractiveness of both the mentioned companies..  

The investigator has provided some recommendations after completing the full project;

• The organizations must focus on the integrity of the information
• The organization must install a systematic process of launching innovative ideas
• Produce products based on the likings and choices of the consumers
• The organizations must implement the perfect financial approaches to develop the business
• The organizations must follow a successful criterion to revive or maintain its operational performance
• The products of the companies must have a minimum value ranging for the employees.
• The business units must have the idea about each and every product and thus they should invest and divest on the products in such a way.

Conclusions

The total report prepared by the researcher has been a great source of learning about product portfolio management and its importance to the organization. The following project has been able to meet all the aims and objectives of the research.  An in depth analysis of the project is utmost necessary to develop a clear knowledge of the same. It can be concluded that product portfolio management is a key aspect for proper performance of the product. The use of the portfolio management tools has helped immensely in concluding the project. To be precise both the models provided here in this research has been defined the different kinds of products and their utilization. The tools used for analyzing the product portfolio will also help the readers have the idea of the product differentiation in terms of sales and revenue growth. The product portfolio picture provided by the researcher will be the perfect example from where the students who may select the same topic can get quality help.

References

Brockmann, T., Stieglitz, S. and Cvetkovic, A., 2015. Prevalent Business Models for the Apple App Store. In Wirtschaftsinformatik (pp. 1206-1221).

Bruch, J. and Bellgran, M., 2014. Integrated portfolio planning of products and production systems. Journal of Manufacturing Technology Management, 25(2), pp.155-174.

Beetles, A. and Strong, C., 2014. Special Issue of Journal of Strategic Marketing on ‘Adding value to marketing education: best practice teaching in a modern education environment’.

Hansen, J.T., 2016. Constructing a Product Brand Identity: The Case of Coca-Cola.

Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.

Ibrahim, K.R. and Gilmour, R.F., 2016, September. Method to identify focus areas for New Product Development. In Management of Engineering and Technology (PICMET), 2016 Portland International Conference on (pp. 2476-2492). IEEE.

Jugend, D. and da Silva, S.L., 2014. Product-portfolio management: A framework based on Methods, Organization, and Strategy. Concurrent Engineering, 22(1), pp.17-28.

Khorshidian, H., Shirazi, M.A. and Ghomi, S.F., 2016. An intelligent truck scheduling and transportation planning optimization model for product portfolio in a cross-dock. Journal of Intelligent Manufacturing, pp.1-22.

Klingebiel, R. and Rammer, C., 2014. Resource allocation strategy for innovation portfolio management. Strategic Management Journal, 35(2), pp.246-268.

Kock, A., Heising, W. and Gemünden, H.G., 2015. How ideation portfolio management influences front?end success. Journal of Product Innovation Management, 32(4), pp.539-555.

Liu, X., Du, G. and Xia, Y., 2015. A stackelberg game theoretic approach to competitive product portfolio management

Martinsuo, M., 2013. Project portfolio management in practice and in context. International Journal of Project Management, 31(6), pp.794-803.

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.

Oh, J., Han, J. and Yang, J., 2014. A fuzzy-based decision-making method for evaluating product discontinuity at the product transition point. Computers in Industry, 65(4), pp.746-760.

Payne, A. and Frow, P., 2014. Developing superior value propositions: a strategic marketing imperative. Journal of Service Management, 25(2), pp.213-227.

Picard, R.G. ed., 2014. Media product portfolios: Issues in management of multiple products and services. Routledge.

Prasad, K.R., 2016. An Effective Study on Strategic Portfolio Analysis. Imperial Journal of Interdisciplinary Research, 2(6).

Proctor, T., 2014. Strategic marketing: an introduction. Routledge.

Rubera, G., Chandrasekaran, D. and Ordanini, A., 2016. Open innovation, product portfolio innovativeness and firm performance: the dual role of new product development capabilities. Academy of Marketing Science. Journal, 44(2), p.166.

Shanbhag, M., Dutt, M.L. and Bagwe, S., 2016. Strategic Talent Management: A Conceptual Analysis of BCG Model. Imperial Journal of Interdisciplinary Research, 2(7).

Shaw, E.H. and Goodrich, K., 2014. Development of a Conceptual Framework. Journal of Child Psychotherapy, 40, pp.73-89

Stark, J., 2015. Product lifecycle management. In Product Lifecycle Management (Volume 1) (pp. 1-29). Springer International Publishing.

Stettina, C.J. and Hörz, J., 2015. Agile portfolio management: An empirical perspective on the practice in use. International Journal of Project Management, 33(1), pp.140-152.

Tolonen, A., Harkonen, J., Verkasalo, M. and Haapasalo, H., 2015. Product portfolio management process over horizontal and vertical portfolios. International Journal of Product Lifecycle Management, 8(3), pp.189-215

Urhahn, C. and Spieth, P., 2014. Governing the Portfolio Management Process for Product Innovation—A Quantitative Analysis on the Relationship Between Portfolio Management Governance, Portfolio Innovativeness, and Firm Performance. IEEE Transactions on Engineering Management, 61(3), pp.522-533.

West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive advantage. Oxford University Press.

Whitehead, J., 2015. BCG (Growth Share) Matrix. Wiley Encyclopedia of Management. (Whitehead 2015)