Ch11 life cycle and portfolio strategies

Corporate Entrepreneurship: Building the Entrepreneurial Organization by Paul Burns

PART 3

STRATEGIES FOR THE

ENTREPRENEURIAL

ORGANIZATION

CHAPTER 11

Life Cycle and Portfolio

Strategies


0 Time

Sales value

IntroductionLow sales

Low growth

Low profits or

losses as costs

are high

Few

competitors

GrowthIncreasing sales

Rapid growth

High profits as

costs come

down

Competitors

emerging &

competition

intensifying

MaturityStatic but high sales

Static but high profits

Focus on cost reduction

Fight for market share

Established competitors

DeclineDeclining sales

Declining profits

or losses

Competitors

exiting

The Product Life Cycle


Introduction Phase:

Elements of Marketing Strategy

• Basic product

• Price low for repeat purchase where trial is

important or price high where novelty or

uniqueness is valued, particularly if repeat

purchase is infrequent

• Promote aggressively

• Explain product benefits

• Build awareness, encourage early adoption

• Selective distribution


0 Time

Sales value


Low growth

Low profits or

losses as costs

are high

Few

competitors


Rapid growth

High profits as

costs come

down

Competitors

emerging &

competition

intensifying







Declining profits

or losses

Competitors

exiting



Introduction Phase:


• Basic product

• Price low for repeat purchase where trial is

important or price high where novelty or

uniqueness is valued, particularly if repeat

purchase is infrequent


• Explain product benefits

• Build awareness, encourage early adoption

• Selective distribution



0 Time

Sales value


Low growth

Low profits or

losses as costs

are high

Few

competitors


Rapid growth

High profits as

costs come

down

Competitors

emerging &

competition

intensifying







Declining profits

or losses

Competitors

exiting


Growth Phase:


• Develop product extensions & service levels

• Price competitively to combat competition &

penetrate market


• Build brand

• Intensive push on distribution

• Limited trade discounts


0 Time

Sales value


Low growth

Low profits or

losses as costs

are high

Few

competitors


Rapid growth

High profits as

costs come

down

Competitors

emerging &

competition

intensifying







Declining profits

or losses

Competitors

exiting



Maturity Phase:


• Wide range of products but expansion slows

• Modify & differentiate product

• Develop next generation of product

• Price defensively – meeting or beating

competition – to ensure maximum return

• Emphasise brand

• Promote selectively, based on special offers

or promotions and trade discounts

• Intensive push on distribution


0 Time

Sales value


Low growth

Low profits or

losses as costs

are high

Few

competitors


Rapid growth

High profits as

costs come

down

Competitors

emerging &

competition

intensifying







Declining profits

or losses

Competitors

exiting



Life Cycle and Competitive Position

Hold niche

Grow with ind.

Harvest profit

Grow fastGrow fast

Attain cost

leadership

Defend position

Attain cost

ledshp. Review

Defend posn.

Renew Grow

with industry

Find niche

Grow with

industry

Turn-around

Consolidate

Withdraw

Divest

Withdraw

Grow fast

Catch up

Differentiate

Differentiate

Focus Grow

with industry

Harvest

Catch-up

Hold niche

Focus

Grow with

industry

Differentiate

Focus

Grow fast

Differentiate

Grow fastReduce costs

Differentiate

Grow with ind.

Harvest profit

Find niche

Grow with ind.

Harvest profit

Turn around

Find niche

Consolidate

Divest

Consolidate

Cut costs

Start-up Growth Maturity Decline

Dominant

Strong

OK

Weak

Very weak

Co

mp

eti

tive

Po

sit

ion


The Boston MatrixM

ark

et

Att

racti

ven

ess

Low

Star Problem Child

DogCash Cow

High

Low

Market Strength

High

Decline

Maturity

Failure

Growth

Introduction Pro

du

ct /

Se

rvic

e la

un

ch


The Boston Matrix Strategy ImplicationsS

tar

Cas

h D

og

Cash

Co

w

INVEST FOR GROWTH

• Penetrate market• Accept moderate short-term

profits• Sell and promote aggressively• Expand geographically• Extend product range• Differentiate product/ service

DEVELOP OPPORTUNITIES

• Be critical of prospects• Invest heavily in selective

products/services• Specialise in strengths• Shore up weaknesses

GENERATE CASH

• Monitor carefully and judge when to discontinue

• Live with low growth• Improve productivity• Reduce costs• Look for ‘easy’ growth

segments

MANAGE FOR EARNINGS

• Maintain market position with successful products/services

• Differentiate products/ services to keep share of key segments

• Prune less successful products/ services

• Stabilise prices, except where a temporarily aggressive stance is required to deter competitors

Pro

ble

m C

hild


The Boston Matrix

Star Problem Child

Cash Cow Dog

Niche

Commodity

Commodity


Product Life Cycle Management

Star Problem Child

Cash Cow Dog

Product extensionsProduct expansions

Product

modifications


The Boston Matrix - Cash Flow

Star

DogCash Cow

Revenue

Expenditure

Cash flow

Revenue

Expenditure

Cash flow

Revenue

Expenditure

Cash flow

Revenue

Expenditure

Cash flow

+ + +

- - -_________

neutral

+

- - -

_________

- -

+ + + +

- -_________

+ +

+

-_________

neutral

Problem Child


ABC Analysis

Contribution

Low High

Class B

Class C

Class A

Sales

High

Low

Low value to the business

High value to

the business


Industry Life Cycles and Mergers &

Acquisitions

Increasing merger, acquisition and alliance activity

Phase 1

Low

concentration

Phase 2

30-45%

concentration

Phase 3

70%

concentration

Phase 4

90%

concentration

Size

Time

Date post:	15-Jul-2015
Category:	Education
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Ch11 life cycle and portfolio strategies

Education