Financial Analysis in Product Portfolio

Management
1. What are the differing financial aspects that need to be focused on for competitive
positioning as the product/service moves through various stages of its life cycle?

The video discussion on Financial Analysis in Product Portfolio Management by Prof.

Ratnatunga indicates a five financial aspects of product life cycle where a certain product
or service go through. First one is the pre-launch phase, in this phase there are basic
research, developing a new product or product improvement, cost and capacity
improvement occur since the sales are low, they need to consider those activity that will
surely have a positive effect in their sales. In the second phase, the introductory phase is
where the companies or business have enough funds to create widespread awareness, for
advertising, product giveaways; reduced prices and trade discounts. Therefore, there is
huge promotion, strengthening brand preference and through the use of emotive factors
for competitive positioning. In addition, a rapid sales growth is observed in this phase.
The next phase is the growth phase where the firm seeks to build brand preference and
increase market share. For instance, a product quality is maintained, and additional features
and support services may be added, pricing is maintained as the firm enjoys increasing
demand with little competition, distribution channels are added as demand increases and
customers accept the product and promotion is aimed at a broader audience. Hence, this will
benefit the firm to increase in sale since one of the marketing strategies in this phase
estimates price that covers cost and meets competition. The fourth phase is the maturity
phase where maximum level of sales will be reached during this phase when the volume
peaks. However, they need to consider some budgets for advertising expenses to hold
market share, to finance new products. If differentiation is possible and could extend the
life of the product, capital investment would increase in the short and possibly the long
run. On the other hand, if differentiation is not possible, capital investment should be
made. The marketing strategy during this phase are intense competition for market share,
price competition and hold market share. Lastly, the decline phase where it is considered
as a downturn in the market. In this phase, many companies are reluctant to phase out a
product. Sales, profits even the cash flow are declining. In addition, the product should be
considered for deletion if cash flow would be negative in both long, and short run.

2. What are the tools and techniques required to provide the product/service
managers with decision-oriented information, especially in financing
technological innovation in the digital age?
 As far as I remember, the professor mentioned a tools and techniques that are required
to provide the product/ service mangers with decision-oriented information, just like the
pareto analysis where 20% of factors frequently contribute to 80% of the organization’s
growth. In this technique, A business can leverage the Pareto Principle by identifying the
characteristics of the top 20% of their customers and finding more customers like them.
When you can identify what small changes will make the largest impact, you are able to
prioritize the decisions that have the highest level of influence. This allows managers to
dedicate their energy and resources on what will actually move the needle for their business.
Second tool is the Marginal Analysis which weighs the benefits of an input or activity
against the costs. It is an effective tool for decision-making because it takes preferences,
resources, and informational constraints into account, so managers can make more optimal
decisions based on this information. In addition, competitive positioning or the Porter’s five
forces Competitive Position Analysis. This theory is based on the concept that there are
five forces that determine the competitive intensity and attractiveness of a market. Porter’s
five forces help to identify where power lies in a business situation. This is useful both in
understanding the strength of an organisation’s current competitive position, and the strength
of a position that an organisation may look to move into. This is very timely and relevant
especially in financing technological innovation in today’s digital age. The world has
transitioned into a heavily digital environment and marketing has had to adapt to this
change. Websites, mobile and e-commerce have changed the way people seek out products
and services and the way they purchase them. Today businesses are interacting digitally with
their customers and collecting vast amounts of consumer information in the process.  In this
digital era, customers are becoming more demanding and have higher expectations than ever
before. They also have much more choice.This has resulted in the focus of marketing
changing. Businesses have had to change the way they market themselves and sell their
products and services to take advantage of the latest digital technology and consumers’
shopping habits. Consumers are now the primary attention of a best practice digital
marketing strategy, which aims to nurture, engage and establish relationships with potential
buyers. To add on, the professor also mentioned game theory wherein negotiating with third
parties or making strategic decisions that involve third parties are occurred. Game theory can
be a useful decision-making technique if you need to take into account exterior third parties
like competitors, clients or legislative authorities. Moreover, a decision matrix is a
technique that contains values that helps you to identify and analyze the performance of the
system. The elements of a decision matrix show results depend on specific criteria. A break-
even analysis helps you to determine at what stage a new business product will be
profitable. It’s an economic calculation used to determine the number of products or services
you need to sell to cover your costs.

https://www.idashboards.com/blog/2019/04/10/4-tools-strategies-for-enhanced-decision-making/