Practice in SME and Large Organizations- MyAssignmenthelp.com

Question: Discuss about the Practice in SME and Large Organizations. Answer: Introduction In current trends, companies are more focused on fulfilling the customers needs and requirements by various types of new products and product development projects. As resulted, there are many new products innovations have been created in the world. In this manner, the concept of product portfolio is very helpful for the companies. Diverse portfolio can be considered as the way to improve the sales of the company and to meet the requirements of the customers in the market. Further, product portfolio can be seen as the leading trend where many products are introduced and then removed by the companies. There is the point to understand that the broad product range can be the cause of mass confusion by the customers so, it can weaken the overall sales of the products. The product portfolio of any company may expand rapidly due to some actions i.e. merger and acquisitions (Majava et al, 2012). The concept of product portfolio management is practiced in many areas of the company i.e. projects, IT, financial assets and product development. Based on the research of many authors, the portfolio management can be considered as the effective platform in strategic product development to focus on the successful and constant innovation within the company. Product portfolio basically deals with the market analysis, product development strategy and product life cycle management for new and existing products (Hnninen et al, 2012). So, product portfolio is the key element of product requirement and management at the enterprise level. It is all about the strategic choices based on the markets, technologies and products. In the portfolio management, product can be classified in many ways i.e., by customer segments, by hardware, by software, documentation products, services, product family, technology generation. This essay describes the concept of the product portfolio by using appropriat e marketing models and the industry examples. The essay demonstrates the application of the concepts of portfolio management by the various companies (Den Hartog, 2012). Product portfolio management The approach of the product portfolio management can be applied in the different areas for managing the set of business activities by the resources. The key objective of the portfolio management can be described as maximizing the values of portfolio, balancing the portfolio and connecting the portfolio to the business strategies (Saaty, 2013). Along with this, portfolio management can be considered as the higher management level in the decision making process to manage dynamic opportunities, uncertainty, strategic goals and interdependencies between the portfolio products to take decisions based on agreed criteria. Product portfolio management is an important task for the multi-product companies as the product portfolio ensures the corporate profitability of the companies in the market (Salvador, Forza Rungtusanatham, 2002). An effective portfolio management is important concept for the successful product innovation. Portfolio management is all about making strategic choices in whic h the business invests in terms of product and technologies. This is about resource allocation i.e. RD, engineering and marketing resources (Wan, Evers Dresner, 2012). Portfolio management basically focuses on the project selection i.e. on which project new product or development projects the companies will choose for the future success. So, in simple words, product portfolio management can be defined as the dynamic process in which the projects related to new products and developments are constantly revised and up-dated. In this process of portfolio management, the new projects are evaluated, selected and resource are allocate or re-allocated for the active projects (Stock, Ruth M. Nicolas, 2011). The portfolio management process is based on the changing information, multiple goals, dynamic opportunities, and various strategic considerations and various decision-makers and locations. New product portfolio management is kind of fairly mechanistic exercise done by the companies for decision making and resource allocation. There are some factors about product portfolio management and those are as follows: New product portfolio management deals with the future projects and opportunities so, there is the need of much information to make decisions in terms of project selection (Kester et al, 2009). Along with this, the decision environment is very dynamic and the status for projects in the portfolio is continuously changing so, new information in this manner is always available. Further, there are different stages of completion of the projects in the portfolio. So there must be comparison between the projects based on various amount and goodness of the information (Reguia, 2014). At last, the resources allocated in the projects are limited and the decision of funding one project may mean that resources must be taken away from another. So, it is important to focus that resources will be allocated equally to each and every project. Thus, every company and business industry needs to be evaluating continuously the performance of its marketing activities. This can be done by monitoring and analyzing how well every individual product is working under the product portfolio. The process of product portfolio is the technique used by various companies to identify the position of every product within the operating market (Brown, 2010). Based on various researches, the catagories in the product portfolio management which are described as follows: Product portfolio is well balanced and structured as it includes the combination of small, medium and large projects at the time of capture. Product portfolio management is the best practices for financial, competitive advantage and efficient resource allocation. New product development practices A study on the new product development by Ledwith (2012) revealed that the best practices in terms of new product development includes promoting greater success in launching and developing new products and services. The new product development practices include process, strategy, research, company culture, project climate, metric and measurements and commercialization. According to Duncan (2012), there are various companies that have implemented innovation governance. The best practices of innovation and product management focus on business processes, implementation plan phase address decision making first, avoid complexity and launching. Product portfolio management is another project management technique as it spans all the way from the vision of organization by project management to gain benefits and advantages in the market. Basically, product portfolio management is not fundamentally management of various projects, but it is about taking right decisions regarding selection of pr ojects to maximize the organizational benefits. Product portfolio management makes sure that right work is being done in the company (David, 2006). Relevant marketing theories in product portfolio Basically, there are various marketing theories and principles which are used by the various companies in the market. In the microeconomic environment, there is the need to link the marketing concepts with the management functions of any company (Pitta Pita, 2012). So, for the product portfolio analysis the theories and models are as follows: The Boston Matrix is the business model by which the company is able to analyze the products or services of the business in terms their share market. The company takes consideration about the rate of growth in the market. By using this method, a company can easily analyze the position of the each and every product in the market. In the figure, the position of the product can be analyzed by this figure. In this figure, the position of the market is divided in the four parts i.e. star, question mark, cash flow and dog. First factor is star which shows high market share with the high market growth. The star product of a company enjoys increased sales revenue. With the increased and growing market, the competitors are attracted. So, result is that company always spends much amount on the promotional activities. The business might be involved in the high capital investments to improve the profitability and capacity of the business. In short term investments, stars may be the cause of cash flow problems in the company because expenditures always exceed income. So, stars products in the company usually generate profit and support to other products in making profits (Schmidt, Sarangee Montoya, 2009). Cash cow is those products who have high market share with low growth market. These types of products often exist in the established markets which have reached on the maturity stage. Having low rate of growth in the market always discourages competition so; it is possible for the companies to spend less on the advertising. The high proportion of cash cows products is perfect for the companies which are seeking for high profit in the market. But the companies having cash cow products always want to develop new and innovated products in order to enter in to high-growth markets (Heising, 2012). Further, the next factor is question mark which can be said problem children for the company. These kinds of products compete in the competitive market having low market share and high market growth. The market is continuously growing and there is the strong competition in the market so, there is the possibility that future sales will increase even if the products does not increase in its share in the market. There are many new products that are problem children at first. So, for such kinds of products, there is the need of large amounts of market research and promotion for the success of the products. If they get success, then they will become stars or cash cows (Eggers, 2012). At last, dog is the last category of the products. These kinds of products have low market share with the low-growth market. So, companies need to think carefully about developing such kinds of products because they provide little scope to the company for profit making. At the time of recession, there are the chances that these products will be dropped (Brettel, Heinemann Engelen, 2011). This model can be easily understood by the example of Cadburys dog product. Cadbury is the famous company having wide range of products for the customers. One of the most favorite products of the company is Dairy Milk, Dairy Milk Whole Nut and Dairy Milk Fruit and Nut. In the range of the products, Whole Nut chocolates are often considered on the least popularity by many customers. So, the chocolate is the dog product for the Cadbury as they have only 1% of market share. Along with this, they have low growth rate also. But, all the dog products cannot be the problem for the company as although this product has only 1% of share in the entire market but the chocolate brings around 40 million every year in terms of revenue for the company. Each and every business, either big or small, should have a balance between these four types of products which are arranged in the Boston Matrix. The generated profit from the cash cow products can be used by the company to help finance stars and investment in the problem children products. By knowing the catagories of the products, the products of the company fall into useful areas i.e. The question mark or problem child products are helpful to make sure that the business of any kind of product is about meeting the needs and requirements of the customers in the operating market. So, it will be the star product in future. A star product of the company can be considered as the real revenue earner as these kinds of products always attract new customers in the business who may well buy other products within the portfolio including cash cows and problem children products. These kinds of products can establish the customers as the brand loyal. Although, it may need lots of cash investment to get success and remain available in the face of competition in the market (Nicholas, 2011). Now, cash cow products in the market are popular as it can be beneficial in providing the finance when there is the need to pay for the marketing of other products. These kinds of products are often the products which launch a company. At last, dog products are predictable. Although these kinds of products should be avoided by the company but the taste and choices of the customers change constantly. So, the companies should be aware about the products that what product will ultimately become a dog product (Ernst, 2002). So, the Boston Matrix is able to provide easy and quick way for the business to take right and correct decisions related to product portfolio and development. Now, there are some more theories regarding product portfolio and development which are described below. Basically, product life cycle provides the estimation of the sales of a product in the market. It provides an outline of the level of the products sales based on its development. This cycle provides the journey of a product from its birth up until its disappearance from the business portfolio. The above diagram shows the first real stage of a product i.e. development. The product is being researched and prepared for the introduction among the customers. Just because, the company has not started its business yet in the market so, there is not any kind of sales in this stage therefore there will be no revenue. The stage of various products life cycle is described below: First is the introduction stage which is also called birth of the product. This is the stage when the product is released in the market. As it is the new product so, everyone is not sure about the success of the product. But, there are many customers who are willing to try the new product so, sales will increase slowly. The pricing strategy is very important at the time of launching stage of the product. The pricing strategy always depends upon the category of product such as skimming of the price, and penetration pricing etc. The next level is the growth stage in which the sales of the product increase rapidly. At this stage, customers respond to the advertisements which have been put in the place. Result is that the brand recognition of the product has been established with the consumers who are satisfied with the customers. In the growth stage, profitability for the company has begun in taking effect (Grnlund, Sjdin Frishammar 2010). Next stage is maturity stage in which sales begin to its level off and very slightly slow down. At this stage, brand loyalty of the product is well-established among the customers. At the maturity level, various promotional offers are provided and they are still strong but the promotional strategies are being relaxed because brand awareness for the product is at the high level. Forth level which shown in the diagram is saturation. It is not so important stage but it is a point in the life cycle of the product. In this point, sales of the product are saturated at the highest level on which the company is ever going to be and after that, it slowly begin to decrease. The fifth and last stage in the product life cycle in which the sales of the product begin to decrease. There are many reasons of fluctuations in the level of sales at the time of maturity level so; it is often difficult to spot the decline in the sales. Decline in the sales can come down for many reasons but main reason can be that the product is viewed as the old fashioned or the improved version of that product is now available in the market for the customers. In such kind of situation, a company has two choices i.e. either discards that product and let it go into decline stage having very little expenditure or develop and implement extension strategies to try and stretch the length of the product life cycle in the market (Cooper, Edgett, Kleinschmidt, 2007). Having various kinds of products, companies want all of their products to be in maturity level as it is the stage at which the company is benefitting with the highest profit. In the market, the taste and preferences of the customers change so, they will buy the different products from the company or they will buy it from the competitors to satisfy their needs. There are many problems in the product portfolio and product life cycle. The main issues is that there is no certainty or accuracy about the products, it is just a prediction of event that at which level the product will get growth in the market. The product life cycle is not based on the change in the taste of the consumers. In present time, the taste and preferences of the customers are changing so, companies are offering more than one products to satisfy their needs and requirements. Companies expect that their products will have the long and happy maturity stage so that they can get higher profits in the market but again, i t is not sure that product will always stay on the maturity stage (Brem Voight, 2009). Enhancing shareholders long term value The role of marketing activities in the functional business process varies greatly. Marketing can be considered as the leading function in managing the relationship with the customers. It basically plays an important role in defining the value position in market, navigation and process management and coordination of the relationship management process. However, the roles of marketing activities process are dominated by technology and engineering-driven culture. To enhance the shareholders value in the market, companies must address the impact of marketing investment of business process. There are marketing theories and practices which improve the shareholders value in the market (Chao Kavadias, 2008). There are many sub-processes within the business process of marketing. Marketing theories are focused in the input of marketing strategies and decisions which impact both market place and financial performance of the company. The marketing theories connect the performance measure of marketplace such as brand loyalty including financial dimensions and reducing volatility of cash flows. Marketing principles and theories have important role in improving the values of shareholders in the business. To develop the winning strategies in the business, companies analyze and identify the contribution of marketing to development, design, integration and execution of the business processes (Coulon, Ernst Lichtentgaler, 2009). Along with this, companies should understand the impact of change on the shareholders while introducing new products in the market. Companies must assess the consequences of the cash flow in the decision, investment and commitment process. To enhance the shareholders value in the business, there are strategies which must be focused by the companies i.e. companies must understand the cash flow analysis methodology and the thought process. There is the process by which a company can improve the values of the shareholders. Company should estimate the minimum return on incremental sales which is needed to create the value for shareholders, Company should compare the return on incremental sales with recently realized rates and initial planning projection. By the estimation of increased sales, company will be able to analyze the total sales of products in the planning period. Next step is to estimate the shareholders value contribution for the various marketing strategies in the business unit and corporate levels. The shareholders value provides important information to the management in terms of greatest value in the market. Further, company should evaluate the financial feasibility of the strategic plan for any product. The evaluation of financial feasibility will be helpful in analyzing that it is fundable or not. To maximize the shareholders value, it includes the evaluation of the planned investment growth strategies of a company. Further, there should be financial self-evaluation done by the company at the business unit and corporate level for the strategic financial planning process. The companies that want to sell and establish the acceptable selling price for the shares and proper price for its product (Rappaport, 2006). So, to maximize the value of shareholders in the business, companies must adopt relevant marketing concepts and strategies. It is important for the companies to evaluate its financial feasibility to gain success in the market. Shareholders values for the long term basis are based on the good returns of the product in the market. So, it is important for the company to adopt the strategy valuator approach in terms of creating value for its shareholders and to contribute in the long term interest of the shareholder and the economy. Conclusion This essay is about the concept product portfolio and its importance in the companies having more than one product in the market. From the above discussion, it is observed that product portfolio is the key element of product requirement and management at the enterprise level. It is all about the strategic choices based on the markets, technologies and products. In the market, the taste and preferences of the customers change constantly so, the products are classified into customer segments, by hardware, by software, documentation products, services, product family, and technology generation. This essay has generated the understanding of product portfolio and its importance in creating shareholders value in the business. Further, there are concepts and theories in the product portfolio which are helpful in analyzing the catagories of products in the market. The Boston Matrix is helpful in dividing the product into various catagories based on their performance in the market. On the bas is of above discussion, it is analyzed that the position of the market is divided in the four parts i.e. star, question mark, cash flow and dog. Further, product life cycle is also important for analyzing the position of products in the market from its birth till death. References Brem, A., Voight K., (2009), Integration of market pull and technology push in the corporate front end and innovation managementinsights from the Germany software industry: Technovation, 29(5): 351367 Brettel, M., Heinemann, F., Engelen, A., (2011), Cross-functional integration of RD, marketing and manufacturing in radical and incremental product innovations and its effects on project effectiveness and efficiency: Journal of Product Innovation Management, 28(2): 251269 Brown, J., (2010), Are there best practices for product portfolio management / clarity on plm, Accessed on 5th May 2017 from https://tech-clarity.com/clarity Chao, R. O., Kavadias S. A., (2008), Theoretical framework for managing the new product development portfolio: when and how to use strategic buckets: Management Science, 54(5): 90792 Cooper, G.R., Edgett, J.S., Kleinschmidt J.E., (2007), Portfolio management for new product development. Results of an industry practices study. Journal of product innovation best practices series, 31 (4), 1-20 Coulon, M., Ernst, H., Lichtentgaler, U., (2009), An overview of tools for managing the corporate innovation portfolio: International Journal of Technology Intelligence and Planning, 5(2), 221239 David, L. R. ,(2006), Product innovation: Leading changes through Integrated Product Development, Combridge University Press, P:3 Den Hartog, E-J. (2012), Reducing complexity at Procter Gamble -complexity approach towards product portfolio management: Master Thesis in Industrial Engineering Management, University of Twente Eggers, J. P., (2012), All experience is not created equal: learning, adapting, and focusing in product portfolio management: Strategic Management Journal, 33(3), 315335 Ernst, H., (2002), Success factors of new products development: a review of the empirical literature: International Journal of Management Reviews, 4(1), 140 Grnlund, J, Sjdin, D., Frishammar, J., (2010), Open Innovation and the Stage-Gate Process: A revised model for new product development: California Management Review, 52(3), 106-131 Hnninen, K., Kinnunen, T., Haapasalo, H., Muhos, M. (2012), Rapid productization challenges and preconditions: International Journal of Product Lifecycle Management Heising, W., (2012), The integration of ideation and project portfolio managementa key factor for sustainable success: International Journal of Project Management, 30(5), 582595 Kester, Linda, Erik J. H., and Kristina L., (2009), Portfolio decision-making genres: A case study: Journal of Engineering and Technology Management, 26 (4), 327-341 Majava, J., Haapasalo, H., Belt, P., Mottonen, M. (2012), Product development drivers in practice: International Journal of Product Development, Submitted for evaluation Nicholas, J., (2011), New product development best practice in SME and large organizations: theory vs practice: European journal of innovation management, 17(2), 227-251 Pitta D., Pita E., (2012), Transforming the nature and scope of new product development: Journal of product and brand management, 21(1), 35-46 Rappaport, A., (2006), Ten Ways to Create Shareholder Value, Accessed on 5th May 2017 from https://hbr.org/2006/09/ten-ways-to-create-shareholder-value Reguia, C., (2014), Product innovation and the competitive advantage: European Scientific Journal, 1857- 7431 Saaty, D., (2013), A Framework for Portfolio Management, Accessed on 5th May 2017 from https://www.pmiwdc.org/sites/default/files/presentations/201309/PMIW_LocalCommunity_Loudoun_Presentation_2013-08_0.pdf Salvador, F., Forza, C., Rungtusanatham, M. (2002), Modularity, product variety, production volume, and component sourcing: theorizing beyond generic prescriptions: Journal of Operations Management, 20(5), pp. 549-575 Schmidt B.J., Sarangee R.K., Montoya M.M., (2009), Exploring new product development project review practices: Journal of product innovation management, 26(5): 520-535 Stock, Ruth M. Nicolas A. Z., (2011), Patterns and performance outcomes of innovation orientation: Journal of the Academy of Marketing Science, 39 (6), 870-888 Wan, X., Evers, P.T. Dresner, M.E. (2012), Too much of a good thing: The impact of product variety on operations and sales performance: Journal of Operations Management, 30(4), pp. 316324