Product Portfolio Models

Product Portfolio Models

-Classification of product portfolio models as standardized, customized and financial models.

-Standardized product portfolio models assume that the value of market position or market share depends on the structure of competition and the stage of the product life cycle.

The Boston Consulting Group (BCG) approach

-§Earliest and the most widely cited standardized approach.

-§Is a chart that had been created by Bruce Henderson in 1970.

-The company classifies all of its strategic business units in the business portfolio matrix.

-Analyst plot a scatter graph to rank business units (or products) on the basis of their relative market shares and growth rates.

image

.BCG & The GE/McKinsey Matrix

image image

The GE/McKinsey Matrix
-The GE approach shares the benefits and problems associated with all standardized portfolio approaches.
-It’s easy to implement, communicate and understand.
-It’s limitation is that it attempts to boil down business strategy to the interplay of a small number of somewhat arbitrary dimensions.
-The GE portfolio software allows you to built a customized matrix.

Financial Models

-Financial portfolio analysis deal with investments in holding of securities generally traded through financial markets.

-The objective id typically to create efficient portfolio.

-The approach is theoretically appealing.

Analytical Hierarchy Process

-The AHP is another approach for assessing and allocating resources in a portfolio.
-It was developed by Thomas L. Saaty in the 1970’s.
-It’s a technique for dealing with complex decisions.
-The AHP provides a method for decomposing a complex decision problem into a hierarchy of more easily comprehended sub-problems  each  of which can be worked with and evaluated on it’s own.
-AHP is most useful where teams of people are working on complex problems.

image

-The AHP is an interactive ,structured process that brings together the key decision makers who represent diverse functions and experiences

-The process is based on three steps.

–Structuring the problem as hierarchy of levels.

–Evaluating the element at each level along each of the criteria at the next level of the hierarchy.

–Weighting the option.

-In running the AHP model one should consider the possibility of rank reversal.
-The Expert Choice software provides two options to address this problem.
-The Ideal mode
-The Distributive mode

Example
-Ciba-Geigy, one of the top 10 pharmaceutical groups in the world.

-Needs to determine long-term international strategy for it dermatological unit.

-The promotional efforts has been irregular.

-A new segment of this market is developing.

-Management identified three possible strategies.

-Milking the existing business.

-Expand the existing business.

-Expand the existing business and create a new segment.

-The strategy guidance committee is in charge of evaluating the strategic consistency of product group’s actions.
-The objective is to ensure maximization of results based on different criteria’s.
-The committee constructed a three-level hierarchy.
-Level 1. is compatibility and consist of two criteria at a secondary level: consistency and support.
-For these inputs the third option is best along all criteria except the level of risk.

image

Be Sociable, Share!

Leave a Reply