I. Product portfolio strategy
(1) Product portfolio expansion strategy: increase product lines, expand business scope, and add new product items. For example: a company produces washing machines while producing televisions.
(2) Product portfolio reduction strategy: reduce product lines or reduce product items. For example: a company sells its PC business to another company.
3) Product line extension strategy:
1) Downward extension: add low-end product items to the high-end product line. For example: a beer company was originally positioned in the high-end beer market, and later added the production and operation of medium and low-end beer.
2) Upward extension: add high-end product items to the original product line. For example: a wool sweater factory produces high-end products such as cashmere sweaters while producing wool sweaters.
3) Two-way extension: a company that was originally positioned in the mid-range product market extends its product line in both the upper and lower directions. For example: a clothing factory was originally positioned in the mid-range product market. After the market was opened and its popularity increased, it added a production line for high-end professional clothing and at the same time increased the number of low-end clothing products.
II. Product portfolio strategy types
Product portfolio strategy is the basis for making other decisions. After determining the product portfolio, the company’s investment portfolio, pricing, distribution channels, promotions and allocation of various resources are basically determined. When choosing a product portfolio, the company does not blindly pursue width, depth, or length, nor does it choose a more specialized product portfolio. Instead, it is based on accurate market research, and then considers market demand, competitive situation, external environment, the company’s own strength and marketing goals. It follows the principle of promoting sales and increasing total profits, makes correct decisions, and acts prudently. There are six common types of product portfolio strategies:
(1) Full-line comprehensive portfolio. The company has multiple production and operation product lines, and each product line has multiple product items. The width and depth of the product items are large, and the correlation between the product lines can be loose or tight. The characteristic of this combination strategy is to provide as many consumers as possible with a variety of products they need, meet their needs, and occupy a relatively broad market. Only companies with huge scale, strong strength, and abundant resources can do this. For example: a company has multiple product lines such as detergent, toothpaste, shampoo, soap, deodorant, lotion, baby diapers, etc., and they are all daily necessities. The correlation between each product line is strong; a group not only produces televisions, but also mobile phones.
(2) Market professional combination. The enterprise takes a specific market as the target market and provides multiple product lines and multiple product items for the consumer group in the market to meet their various needs. The characteristics of this combination strategy are large breadth and depth, low correlation, and comprehensive understanding of the various needs of the enterprise’s target consumers. This combination strategy is still suitable for large-scale enterprises. For example: a company mainly produces suits, ties, leather goods, tie clips, perfumes and other products for men.
(3) Product series professional combination. The enterprise produces several product items in a few product lines with strong correlation to meet the different needs of different consumers for these products. The characteristics of this combination strategy are small breadth and depth but high correlation, high similarity in product technical requirements, high degree of production specialization, which is conducive to extending technological advantages and improving production efficiency. For example: a certain enterprise has been committed to the production of refrigeration products, and has a few product lines such as air conditioners and refrigerators. The product items of each product line are also relatively limited, but the production volume is large.
(4) Product series concentrated combination. The enterprise concentrates various resources to produce several product items in a single product line in order to more effectively meet the needs of a certain part of consumers for this type of product. The characteristics of this combination strategy are the smallest width, slightly larger depth and high correlation, and the products and target markets are relatively concentrated, which is conducive to the enterprise to better occupy the market. This is a combination strategy often used by small and medium-sized enterprises. For example: a certain group only produced microwave ovens in the early stage of its establishment, and its colors and varieties were also relatively limited.
(5) Special product professional combination. The enterprise relies on its own special technology and production conditions to produce products that can meet certain special needs. The characteristics of this combination strategy are small width, depth and length, the target consumers have special needs, and the production is highly targeted and targeted. In many cases, products are customized according to the special personalized needs of consumers. For example: a certain enterprise specializes in producing prostheses, wheelchairs and rehabilitation equipment for the disabled.
(6) Single product combination. The enterprise only produces one or a few products to adapt to and meet a single market demand. The characteristics of this combination strategy are simplified product lines, simple production processes, and mass production, which is conducive to improving labor efficiency and reducing costs; it is also easy to keep improving technology, which is conducive to improving product quality and grade. However, due to the single product produced and operated, the enterprise is too dependent on the product, so it has poor adaptability to market demand and greater risks.