How to understand the main functions of product portfolio?
The so-called product mix refers to the combination of all product lines and product items produced or operated by an enterprise, including four variables: width, length, depth and consistency.
(1) The breadth of product portfolio refers to the number of product lines owned by an enterprise. More product lines mean a wider product portfolio. (2) the length of the product portfolio. Refers to the average number of product varieties owned by an enterprise, that is, the quotient obtained by dividing all varieties by all product lines. (3) Product collocation depth refers to the number of colors and specifications of each variety. (4) Density of product mix. Refers to the product of each product line in the end use, production conditions, distribution and other aspects of the degree of correlation. The existing product mix strategy of enterprises should follow three basic principles: it is conducive to promoting sales, competition and increasing the total profit of enterprises.
Enterprises can choose the following strategies according to the different situations and characteristics of the target market when making product mix decisions:
1, expanding product portfolio strategy The so-called expanding product portfolio strategy is to expand the width or depth of product portfolio.
In other words, the enterprise will add one or more product lines to expand the product business scope on the basis of the original product line, or add new product items on the basis of the original product items to produce and operate more products to meet the market demand.
The strategy of expanding product mix is a corresponding decision made after forecasting the market prospect on the basis of full market investigation. When enterprises predict that the sales and profits of existing product projects may decline in the future, they should consider adding new projects to the existing product portfolio or strengthening product projects with market potential.
The newly added product line may or may not be related to the original product line. For example, a company specializing in gold jewelry has increased platinum jewelry projects and jewelry product lines in order to meet market demand. The former is a related project, and the latter is an unrelated product line expansion.
2. Reduce the product mix strategy
The strategy of reducing product mix is to reduce product lines or product projects, especially those with small profits, so as to concentrate on operating product lines and product projects with large profits.
3. The high-end product strategy is to add high-end and high-priced products on the basis of the original product line.
4. The strategy of low-grade products is to add low-grade and low-price products to the original product line.