Marketing

MKTM028 Marketing Strategy MBA

Product Portfolio

Introduction

In the current scenario, product portfolio has become an emerging trend for the firms as it supports to manage different range of the product and services of the brand in an effective manner (Rubera, Chandrasekaran and Ordanini, 2016). In the contemporary market environment, there is high competition increasing in the market due to this reason, firms prefer to develop different product lines which assist to cover wide market range. Dealing in multiple product lines enable them to attract high market share and also enables to influence the investors too. Designing product portfolio practices remain assistive to maintain leading position in the market while focusing towards the need of new launch of the products. Product portfolio is the concept which is used by the firms to attract wide target market (de Villiers, Woodside and Marshall, 2016).

Moreover, the concept of multiple product lines remain supportive for the firm to gain the profit as when a product remains on maturity stage at that time company can earn profit from other product which is in growth stage. So, it enables the firm to maintain the profit margin while generating enough revenue for the purpose of developing long-term sustainability in the industry (Kraiczy, Hack and Kellermanns, 2014). In this context, this report is based on product portfolio. For this purpose, researcher has taken three different models, i.e. product life cycle, BCG matrix and product bubble chart. Moreover, researcher has utilized different examples to explain the product portfolios of different firms which has supported towards offering in-depth knowledge regarding the research topic. This study has supported to offer the explanation regarding the product life cycle (PLC). In like manner, it has enabled to discuss other model of product portfolio, i.e. BCG model matrix and product bubble chart which has enabled to describe and discuss the detailed information about product portfolio in the contemporary market environment.

Industry Introduction

To get the in-depth knowledge regarding the product portfolio, researcher has taken restaurant industry as in this industry there is a huge competition (Chrisman, et al., 2015). So, to survive in the environment of fierce competition, firm needs to utilize different strategies in the context of product or services. In the restaurant industry, firm has taken Mc. Donald’s and Burger as both the firm is dealing in chain restaurant industry and are dealing at global platform. This industry majorly deals in service sector and in this sector consumer expectation is highly unpredictable in nature. This industry majorly deals in eatery. It is a business which prepares as well as serves food and drinks to the consumers in exchange for money.

Concept of Product Portfolio

A set of the collected products that are presented by a company is a product portfolio. The product portfolio also provides different categories of the product with a proper product line. In the addition, the product portfolio also provides a deep analysis of the products such as company growth with product, product profit margin, market leadership etc. (McNally, Durmuşoğlu and Calantone, 2013). A product portfolio requires management at all three levels. A manager is the person who remains liable for managing the product at the individual level. Moreover, medium level manager needs to focus on the management of the product line and top level managers remain liable to manage the whole product portfolio. For getting better result in the context of achieving the goals, an organization needs to do comparison between the different departments of the product. In this context, Schultz, Salomo and Talke (2013) determined that product portfolio remains highly assistive.

Product portfolio also supports to decide the cost of different products of each and every product line of the firm. It also enables to include various indirect expenses such as advertising expenses, growth expenses, high transportation cost, etc. so involving all these expenditures support to identify the exact costing of the firm towards the development of the product and supports to decide the pricing strategy according to its which supports to get the success in the market (Takami, Sheikh and Sana, 2016).

BCG Model

The BCG matrix is useful to design long term strategic planning. In terms of product portfolio management, this matrix considers the growth opportunity to the organization and the investment areas for the development of the product (Li, et al., 2014). There are four basic quadrants in the BCG matrix to place the product in a portfolio.

BCG Matrix

(Source: Hollensen, 2015)

Star – It is a situation, where a product can be a market leader, because of high market growth with high market share of the firm. This type of product has a strong position to sustain in the market. The product is useful for the firm to collect a large amount of cash and there is a need of holding their shares at this position (Peppard and Ward, 2016).

Cash Cows – Most of the stars become cash cows, it happens, because of the growth of the market is low and has high market share. In this situation, the product selling is high with good profit, but the business growth is low (Hollensen, 2015).

Dog – The dog situation in the BCG demonstrates that the growth rate and market share both are low. This situation should be removed for the product portfolio, because it removes the product from the market (Peppard and Ward, 2016).

Question Mark – In this, a firm has low market share with a high growth. The product is needed to invest more to continue in the market and try to become a star also, otherwise the product may leave the market or get a situation of the dog (Hollensen, 2015).

BCG Matrix of Mc. Donald’s

McDonald’s is American based hamburger and fast food restaurant chain which was founded in the year 1940 (Mc. Donald’s, 2017). The major target customers of Mc. Donald’s are kids & family. It is one of the largest restaurant chains at a global platform. It is serving approx. 69 million consumers on a daily basis while dealing in over 100 countries. The corporation has 36,900 plus outlets. It deals in different product lines. Its product portfolio comprises of following product lines: hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinksmilkshakes, wraps, and desserts (Mc. Donald’s, 2017). Firm is highly focused towards changing the product range according to the changing consumer tastes. While focusing towards health parameters, firm has expanded its menu and has included the product lines of saladsfishwrapssmoothies and fruits too. This corporation is the second largest private employer in the world.

Stars

High market growth rate

High relative market share

 

Hamburger

Cold Drink

Fries

Milkshakes

Breakfast

Question Mark

High market growth rate

Low relative market share

 

 

Ice-cream

Salads

 

Cash Cows

Low market growth rate

High relative market share

 

Rice

Fish

Wraps

Smoothies

Dogs

Low market growth rate

Low relative market share

 

Hot Drinks

Desserts

BCG Matrix of Mc. Donald’s

From the above BCG matrix, it can be understood that hamburger, cold drink, fries, milkshakes and breakfast are the product lines which are in star segment and are offering high market growth as well as high relative market share. In like manner, ice cream and salads is in question mark segment and they are offering high market growth with low relative market share (Biswas, 2017). Additionally, rice, fish, wraps and smoothies are the product line which is offering low market growth with relatively high market share and hot drinks & desserts lie in dog stage as it offers low market growth with relatively low market share (Biswas, 2017). This BCG matrix remains highly assistive to understand the cash flow of the different product lines of product portfolio while giving concern towards market growth and market share. Moreover, it supports Mc. Donald’s to design effective market strategy according to the market growth and market share of the product. In support of this, Relich (2016) depicted that for the products which lie in star stage, firm utilizes invest or growth strategy. In like manner, in cash cow stage, firm utilizes effective promotional strategy. Under dog stage firm utilizes divest strategy and in question mark stage firm focuses towards that the firm will be grown to star or will degenerate into the dog stage.

Product Lifecycle

Product life cycle plays vital role to understand the position of the different products of the portfolio in the market. It enables to understand the current market need of the consumers and enables the firm to design the market strategies and the products according to it. It also enables to balance the product portfolio while focusing towards customer satisfaction (Khorshidian, Shirazi and Ghomi, 2016). It enables to determine the life of different product line, which supports to develop new strategy while calculating the life and stages of different products.

Product Lifecycle

(Source: Vezzetti, Violante and Marcolin, 2014)

Introduction:

This stage is also known as birth stage where the product introduces by the firm in the market. This stage is highly risky stage as in this stage, as the product is new for the market, so the surety of the success remains dicey. In this scenario, lots of consumers show willingness to test the new product (Vezzetti, Violante and Marcolin, 2014). In this stage, sales of the product increases slowly and firm needs to do considerable revenue expense in the advertising and to making the customers aware about the product. Pricing strategy plays vital role in this stage.

Growth:

In this stage, the sales of the product increase at a fast pace as the consumers start responding to the advertisement (Fichman, Nambisan and Halpern, 2014). So, in this stage, brand recognition takes place and company becomes earn the profit by increasing the brand loyalty of those customers who are satisfied by the products of the firm. This stage enables to provide the full advantage of leading in the market.

Maturity:

Under this stage, firms focus towards maintaining its position in the market. In this stage, firm focuses towards making changes in the pricing strategy and promotional activities to attract the target customers and to retain the brand loyal customers (Vezzetti, Violante and Marcolin, 2014). In this stage, it becomes difficult for the firm to increase the company sales and to increase the sustainability in the market.

 Decline:

In this stage, the product starts declining due to which it is the crucial stage of the firm as in this stage firm tries hard to stay in the market. In this stage firm faces the challenge of decreasing sales of the product due to increase in competition in the market (Fichman, Nambisan and Halpern, 2014). Due to this reason, under this stage, company decides to switch to the new product or decides to do effective changes in the existing product line which will remain supportive to fulfil the current market demand.

Product Life Cycle of Mc. Donald’s

In the introduction stage McDonalds has focused towards introducing the product line in the market while giving concern towards the trend of the market. In this context, company have given focus towards research and development parameters. Moreover, under this stage Mc. Donald’s used competitive pricing strategies and utilized effective promotional activities which remained assistive to introduce the product range in the market (Khoa, 2017). Firm gave huge focus towards the taste of the consumers of the local market which has supported the firm to influence the buying behaviour of the consumers. Meinrenken and Lackner (2014) depicted that introduction is the risky stage as in this stage firm needs to create the value of the product and the success or failure of the product remains highly uncertain. In the introduction stage, Mc. Donald’s have started to deal with the product lines of hamburgers, milkshakes, and fries (CNN, 2017).

In growth stage, firm has given concern towards changing the promotional and pricing strategies. Moreover, Mc. Donald’s has also utilized the strategy of discounts, offers, coupons, etc. which has supported the firm to increase the company sales by influencing the consumers. In this stage, firm has enjoyed huge profit from the product line as the sales of the product increased at a fast pace in this stage. In this stage, firm has focused towards increasing the brand loyalty which has taken place due to increase in the satisfaction level of the customers (Jiao, Zhou and Du, 2016). This stage has allowed the firm to get full advantage of the product on the basis of leading in the market.

In the current scenario, firm is in maturity stage, firm has shown stability with the pricing and promotional strategy of the products. In the current scenario, most of the products of Mc. Donald’s are in maturity stage. Mc. Donald’s utilizes various strategies to eliminate the situation of decline strategy (Chrisman, et al., 2015). For this purpose, firm focuses towards introducing new element in the existing product range such as at present, firm has increased the concern towards organic and healthy meals. These strategies enable the firm to compete in the global market. In maturity stage, to sustain in the market, Mc. Donald’s has increased the concern towards healthy and organic meals. For this purpose, firm has expanded its menu by introducing the new product lines of saladsfishwrapssmoothies and fruits (Mc. Donald’s, 2017). Firm has also increased concern towards utilizing the strategies which were implemented in growth stage. It has enabled the firm to boost the company sales time to time.

In the views of Ma (2016), to sustain in maturity stage, firm focuses towards introducing more appealing products to the consumers which supports to maintain or increase the market share. In this context, Mc. Donald’s is in maturity stage and this firm is lying in this stage, from so many years. Mc. Donald’s utilizes effective strategy, which eliminate the chances of decline of the product line. This is the major reason behind at present also firm is offering hamburgers, milkshakes, and fries but now its product portfolio has also included soft drinks, chicken nuggets, snack wraps, ice cream etc. (Chrisman, et al., 2015). It shows that firm utilizes effective strategy which enables the firm to introduce new products while still satisfying their costumers from the old product range.

BCG Matrix of Burger King

Burger King is dealing in fast food chain restaurant industry which was founded in the year 1953 (Burger King, 2017). At present company have multiple small business units (SBU) which are working towards the development of the product portfolios. It is Florida based firm and it is committed towards offering quality food to the customers while focusing towards environment and corporate governance. This corporation is focused towards cost leadership strategy while utilising focus differentiation strategy. These strategies support the firm to influence the company sale while targeting young working males. These strategies support the firm to offer the meal to the target audience in an affordable price with great taste.

In the introduction stage, firm has start dealing with the burger product line. Firm utilized various strategies to promote the brand in the global market. In this stage, firm has given huge concern towards creating brand awareness. In the growth stage, firm has focused towards its pricing strategy and introduced the value meals too which remain assistive to gain huge customer base and profit margin (Ma, 2016). In the maturity stage, firm focuses towards utilizing strategy to eliminate the chances of decline. For this purpose, firm ads value in its product moreover focuses towards advertisement as well as pricing strategy.

At present, firm is in maturity stage and dealing in various product lines. Now it is not the restaurant which just offers the services of burgers. However, its product portfolio includes the product line of Burgers, hot dogs, salads & veggies, chicken & more, breakfast, beverages, coffee & frapes, sides, sweets, etc. (Burger King, 2017). Moreover, firm also deals in the product line of value meals & King JR meals. It also offers various choices in its product lines such as –

Sides – onion rings, fries, hash browns and nuggets

Salads – Chicken Caesar Salad, Morning Star Veggie Salad

Beverages – sodas, smoothies, juices, milk, water, coffee, iced tea, frappes

Desserts – Oreo Shake, Caramel Sundae, Dutch Apple Pie

Product Bubble Chart

This chart remains assistive to evaluate the risk-value while representing the portfolio view. It supports to represent the overall projects while putting the products into one of four quadrants on the basis of value and risk (Jugend, et al., 2016). This chart supports to identify the product which has overall greater value to the organization as compared to other products and supports to highlight the risk level too of the overall products of the product portfolio.

Mc. Donald’s Product Bubble Chart

(Source: Relich, 2016)

The major benefits of this model in the context of Mc. Donald’s are that it supports to quickly analyse the balance of the current portfolio. Use of portfolio bubble charts remains highly assistive for the firm in the context of product portfolio governance. Moreover, it supports to understand in a glance that which product has higher-value/ lower-risk as well as which product have lower-value/ higher-risk (Hahn, Ito and Narjoko, 2016). This matrix enables to analyse that how to minimize the risk while increasing the value of the firm. It enables to enhance the management of the organization so that the product portfolios can be governed in an effective manner (Relich, 2016).

Conclusion

From the above study, it can be concluded that product portfolio remains highly assistive for the firm as it supports towards offering strong marketing tool for the organization and supports to manage the different product line of the firm while focusing towards customer demand in the context of the market. In this context, BCG matrix, product bubble chart and product life cycle remains highly assistive as it supports to understand the product stage and supports to design the strategy according to it.

Recommendations

From the above study, it can be identified that it is essential to utilize effective market strategy for the product stage. Moreover, as consumers are the king of the market, it is essential to introduce new product or changing in the existing product while focusing towards the taste and preferences of the customers.

In this context, it is recommended that firm needs to improve the product portfolio in a manner that it will remain assistive to increase the value while decreasing the risk factor. Moreover, it is recommended that only BCG matrix and PLC analysis is not sufficient for designing effective product portfolio as they only become able to represent the position of the product. But not become able to provide the ways that can be used to develop the product. So, there is a need of utilizing the strategy of effective market research and development to understand the contemporary market and the required change. It will enable the firm to develop the product portfolio while utilising innovation strategy. Moreover, there is a need of prioritization as it will remain assistive towards trade-off planning and decisions. While designing the product portfolio methods, it is essential to build an actionable strategy, while forecasting the risk and to design variety of methods that can be remain help to solve the issues.

So, from the study, it can be recommended that –

  • There is a need of effective research and development strategy to analyse the market need. This recommendation will support to maximize the product value and will enable to increase the number of brand loyal consumers.
  • Moreover, firm needs to focus towards utilizing the strategy of prioritization by utilizing variety of methods which will enable to build an actionable strategy. It will also enable to forecast the risk and develop effective strategy to eliminate the situation of risk. The recommendation will support to develop the product portfolio in an effective manner. It will support to decrease the market risk and will support the firm to increase the growth of the company in the market.

References

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