Monday, October 3, 2011

PEST Analysis

PESTLE stands for - Political, Economic, Sociological, Technological, Legal, Environmental. The term PESTLE has been used regularly in the last 10 years and its true history is difficult to establish. Various other similar acronyms have been used including ETPS, STEP, PEST, and STEEPLE. The term PESTLE is particularly popular on HR and introductory marketing courses in the UK.

PESTLE analysis is in effect an audit of an organisation's environmental influences with the purpose of using this information to guide strategic decision-making. The assumption is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.

To help make decisions and to plan for future events, organisations need to understand the wider ‘meso-economic’ and ‘macro-economic’ environments in which they operate. (The meso-economic environment is the one in which we operate and have limited influence or impact, the macro-environment includes all factors that influence an organisation but are out of its direct control). An organisation on its own cannot affect these factors, nor can these factors directly affect the profitability of an organisation. But by understanding these environments, it is possible to take the advantage to maximise the opportunities and minimise the threats to the organisation. Conducting a strategic analysis entails scanning these economic environments to detect and understand the broad, long term trends.

A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organisation is operating. Specifically a PESTLE analysis is a useful tool for understanding risks associated with market (the need for a product or service) growth or decline, and as such the position, potential and direction for an individual business or organisation.

A PESTLE analysis is often used as a generic 'orientation' tool, finding out where an organisation or product is in the context of what is happening outside that will at some point affect what is happening inside an organisation. The six elements form a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea.

Management Building Blocks

What are the most important fundamentals of the management profession? Or, what should a manager concern himself or herself with when managing an organisation? This question is not that easy to answer and, moreover, heavily dependent on the type of organisation that is involved. And yet there are six areas that require attention that are of interest everywhere and under every condition. These are: 

  • Strategy, 
  • Structure, 
  • Culture, 
  • People, 
  • Resources
  • Results. 

These areas that require special attention or management building blocks are also sometimes referred to as the management or design variables of an organisation. Further study shows that most building blocks appear in the most important management reference models, to a lesser or a greater degree, that are used on a global scale. 


The strategy area deals with the objectives of the organisation (mission and vision) and with the method used by the organisation to attain these (strategy and policy). Basically, finding the balance between the desired external results and the existing internal possibilities is what is important. A good strategy, therefore, makes provisions for both the outside of an organisation (what do we want to achieve) and the inside of on organisation (which structure, culture, people and resources do we need to achieve the required results).


The structure area is related to the organisation and the process structure. Basically, it deals with the issue on how business activities are organised and which tasks, competences and responsibilities employees have. This area that requires special attention is called processes in the INK/EFQM model to highlight the importance of it. The result is that attention is not paid to the organisation model, which is actually incorrect.


The culture area deals with the question on how people interact just as structure does. The soft or informal side of manners is, however, involved. Essentially, culture is about the basic values of the organisation. The leadership INK/EFQM area is related to the behaviour side of managers (leaders) and, therefore, falls under culture. This also applies to management style and shared values as used in the 7S model of McKinsey.People

The people area mainly relates to managing competencies (knowledge and skills). Use is made of two approaches: developing and safeguarding knowledge and skills of an organisation and the personal career development of the employee himself or herself.ResourcesThe resources area involves the broad range of “other” resources. That is: financial management (money), information management (ICT), facility management (accommodation, materials, secretarial services, security and catering) and communication management. There is no unambiguous opinion about the place of purchase management (chains) amongst the different models. There is even a difference between INK (not a separate area that requires special attention) and EFQM (an area that requires special attention under resources) regarding this issue.


The results area is not present in all reference models. This area is best worked out in the INK/EFQM models. Basically, the question regarding what the work carried out by the organisation has provided is involved. The starting point is looking “outside-in”. The rating is determined (measures) in relation to the four most important groups of stakeholders; that is: employees, customers and suppliers, society and end results (financial and operational objectives).

The figure below, for example, shows the INK (Instituut Nederlandse Kwaliteit) management model. This is the Dutch variant of the European EFQM (European Foundation for Quality Management) excellence model.

McKinsey 7 S model

Balance Scorecard Strategy Map

Balance Scorecard

GE Mckinsey Matrix

The GE/McKinsey Matrix was developed jointly by McKinsey and General Electric in the early 1970s as a derivation of the BCG Matrix. GE, by that time, had approximately 150 different business units and was disappointed with the profits derived from its investments. This raised internal concerns about the approach the organization had to investment decision making. While exploring new models to implement, GE started to be interested in visual strategic frameworks like the Growth-Share Matrix created by the Boston Consulting Group (BCG) a few years before. However, the BCG Matrix showed to have some limitations. It was considered not flexible enough to include all the broader issues that a company was facing while operating in a fast changing global environment. The GE/McKinsey Matrix solves most of the issues of the BCG model and proposes a more sophisticated and comprehensive approach to investment decision making.

The GE/McKinsey Matrix is a nine-cell (3 by 3) matrix and it is primary used to perform business portfolio analysis on the strategic business units (SBU) of a corporation. A business portfolio is the collection of all the business units within a corporation and a large corporation has normally many SBUs. Each SBU is a distinctive and unique unit that falls under the same strategic hat. A well balanced portfolio is one of the top priorities of a large organization. The strategic business units are the basic blocks that compose a business portfolio. A unit can be a divisions or even a whole company owned by the parent organization.
The nine-box matrix provides decision makers with a systematic and effective framework for a decentralized corporation to make better supported investment decisions and for developing strategies for future product development or new market segment entries. Instead of looking solely at each unit's future prospects, a corporation can adopt a multi-dimensional approach based on two components that will indicate how well the unit will perform in the future. The two components used to evaluate businesses, which also serve as the axes of the matrix, are the 'attractiveness' of the relevant industry and the unit's 'competitive strength' within the same industry. Each axis is then divided into Low, Medium and High.


Six steps are necessary to implement the GE/McKinsey analysis:
  • 1. Determine which factors are relevant for the corporation in the industry where it operates
  • 2. Assign a weight to each factor
  • 3. Score each factor
  • 4. Multiply the relative scores and weights
  • 5. Sum all up and interpret the graph
  • 6. Perform a review / sensitivity analysis
The plotted circles convey the information in the following way:
  • The size of the circle represents the market size of the SBU
  • The share owned by the SBU is expressed as a pie slice with its relative percentage inside
  • The expected future direction of the SBU is represented with an arrow
The circles representing SBUs are then placed within the matrix. As a result, the executives of the corporation will have a clear and powerful analytic map for understanding and managing their entire multi-unit business. The units that fall above the diagonal indicate the investment and growth to be pursued; the units along the diagonal require a thorough analysis and individual selection for investment; finally the units below the diagonal might indicate divestments are necessary or otherwise that businesses can be kept only for cash reasons. The placement of the units within the matrix is a necessary first step before the analysis phase that requires human judgement can begin. For example, a strong unit in a weak industry is in a very different situation than a weak unit in a highly attractive industry.

Strength & Weakness

The GE/McKinsey Matrix, as an extension of the BCG framework, shares the aforementioned advantages of the BCG model. Though the GE/McKinsey Matrix is more sophisticated than the BCG matrix and can provide higher value information for the executive management, it has several flaws and limitations:
  • No proven relationship between market attractiveness and business position.
  • The relationships between different units are not taken into account.
  • The core-competencies that lead to value creation are not taken into consideration.
  • The approach requires extensive data gathering.
  • Scoring is personal and subjective (risk of bias)
  • There is no hard and fast rule on how to weight elements.
  • The GE/McKinsey Matrix offers a broad strategy and does not indicate how best to implement it.
For the above limitations and issues, the GE/McKinsey Matrix can serve more as a quick strategic visual framework rather than as a resource allocation tool.
Example of application of GE Mckinsey Matrix

Apple Inc. is a large technology company with several business units operating in different markets, including desktop computers, laptops, tablet computers (iPads), portable music players (iPods), smartphones (iPhones) and software to support these products. A competitor wishing to gain competitive intelligence on the activities of Apple Inc. could do so by placing its business units into a GE/McKinsey Matrix. By analyzing this matrix, it could determine which business units Apple is likely to invest in heavily, develop selectively, or divest.
The market attractiveness axis would be relatively easy for the competitor to assess if it is currently operating in that market, since this consists of factors external to Apple. This includes easily obtainable information such as the current market size and market growth rate. However, some factors would have to be assessed subjectively, such as barriers to entry and the state of technological development.
In contrast, the business unit strength axis would be more difficult to assess since it consists of factors internal to the company, such as customer loyalty, access to resources, and management strength. However, a great deal of information could be obtained from secondary sources, such as the Internet, the media, and shareholder reports.


Assessment of Apple business units in the GE/McKinsey Matrix

From an assessment of the above GE/McKinsey Matrix, it becomes clear that Apple is at least moderately strong in each of its business units and it competes in a number of attractive and fast-growing segments, such as tablet computers and smartphones. A competitor performing this analysis would realize that Apple is unlikely to divest any of these business units and is likely using its personal computer and music products as cash cows in order to fund R&D and growth in the faster-growing markets. The barriers to entry in all of these markets are considerable, since entry would require a large amount of funding for either R&D or the acquisition of the necessary technology and expertise. If the company performing this analysis decides to compete with Apple, it should do so in the newest, fastest-growing markets (tablets and smartphones), as these represent the areas of greatest opportunity, despite Apple’s early dominance.

BCG Matrix

The BCG Matrix (Growth-Share Matrix) was created in the late 1960s by the founder of the Boston Consulting Group, Bruce Henderson, as a tool to help his clients with efficient allocation of resources among different business units. It has since been used as a portfolio planning and analysis tool for marketing, brand management and strategy development.
In order to ensure successful long-term operation, every business organization should have a portfolio of products/services rather than just one product or service. This portfolio should contain both high-growth and low-growth products/services. High-growth products have the potential to generate lots of cash but also require substantial amounts of investment. Low-growth products with high market share, on the other hand, generate lots of cash while needing minimal investment.

The BCG Matrix helps a company with multiple business units/products by determining the strengths of each business unit/product and the course of action for each business unit/product. An understanding of these factors will give the company the highest probability of winning against its competitors, since the intelligence generated can be used to develop portfolio management strategies.
The BCG Matrix helps managers classify business units/products as low or high performers using the following criteria:
  • 1. Relative market share (strength of a business unit's position in that market)
  • 2. Market growth rate (attractiveness of the market in which a business unit operates)
Relative market share (RMS) is the percentage of the total market that is being controlled by the company being analyzed. It is calculated using the following formula:
RMS = Unit sales this year / Unit sales this year by a leading rival
The relative market share is measured on a scale where 1.0 is considered a cut-off point. An RMS of more than 1.0 indicates that this company/product/business unit has a higher market share than the leading competitor.
Market growth (MGR) is used as a measure of a market’s attractiveness. It is calculated using the following formula:
MGR = (Individual sales this year - individual sales last year) / Individual sales last year
High growth markets are the ones where the total available market share is expanding, offering plenty of opportunity for everyone to make money. Traditionally, a market growth rate of 10% has been used as a cut-off point for the purpose of classifying the units in the business portfolio. Any unit with a growth rate of more than 10% would be placed in the high growth segment of the BCG Matrix.
This classification places business units/products in the following four categories:
  • 1. Stars – BUs/products characterized by high-growth and high- market share. They often require heavy external investment to sustain their rapid growth as they may not be producing any positive cash flow. Eventually, their growth will slow, and they will turn into cash cows.
  • 2. Cash Cows - BUs/products characterized by low-growth, high-market share. These are well established and successful BUs that do not require substantial investment to keep their market share. They produce a lot of cash to be used for other business units (Stars and Question Marks) of the company.
  • 3. Question Marks - BUs/products characterized by low-market share in high-growth markets. They require a lot of financial resources to increase their share since they cannot generate enough cash themselves. The crucial decision is to decide which Question Marks to phase out and which ones to grow into Stars.
  • 4. Dogs - BUs/products with low-growth, low-market share. In addition, they often have poor profitability. The business strategy for a Dog is most often to divest. However, occasionally management might make a decision to hold a Dog for possible strategic repositioning as a Question Mark or Cash Cow.
The BCG model follows the following major steps:
  • 1. Identify major organizational business units (BUs) and identify RMS and MGR for each BU
  • 2. Plot the BUs on the BCG Matrix
  • 3. Classify the BUs as Question Marks, Stars, Cash Cows and Dogs
  • 4. Develop strategies for each BU based on their position and movement trends within the matrix

Image:BCG Matrix Example.png

Strengths of the BCG Model:
  • The BCG Matrix allows for a visual presentation of the competitive position of all units in a business portfolio.
  • The BCG model allows companies to develop a customized strategy for each product or business unit instead of having a one-size-fits-all approach.
  • Simple and easy to understand.
  • It works well for companies with multiple divisions and products
  • Allows for quick and simple screening of business opportunities in order to determine investment priorities in the portfolio of products/business units.
  • It is used to identify how corporate cash resources can be best allocated to maximize a company’s future growth and profitability.
  • Useful for the development of investment, marketing and operating decisions:
    • a. Investment in the business unit in order to build its market share
    • b. Sufficient investment to maintain the business unit's market share at the current level
    • c. Determine which business unit/product will function as a cash cow to provide necessary cash flow for the other business units/products
    • d. Divest a business unit
Weaknesses of the BCG Model:
  • The BCG model assumes that high market share and market growth are the only success factors. Based on numerous real life examples, we can conclude that high market share does not always lead to profitability. Businesses with low market share can be highly profitable as well. Relative market strength is also determined by the following factors which the BCG does not take into account:
    • a. Technological competence
    • b. Ability to maintain low manufacturing costs
    • c. Financial strength of competition
    • d. Distribution capabilities
    • e. Human resources
  • The BCG model focuses on major competitors when analyzing the relative market share of a company. However, it neglects some small competitors with fast growing market shares.
  • It is a rather short-term model that doesn’t fully show how characteristics of business units change over the long term.
  • The BCG model is more focused on business units than individual products
  • Assumes that high rates of profit are directly related to high market share
  • The BCG model looks at a business unit in isolation without taking into consideration the possible cooperation among various business units within the organization
  • BCG is a primarily qualitative model
  • The Y axis represents the annual market growth which fails to see the full picture that goes beyond a one year span
  • It does not take into consideration other important factors such as: market barriers/restrictions, market density, profitability, politics
  • With this or any other such analytical tool, ranking business units has a subjective element involving guesswork about the future, particularly with respect to growth rates.

Market Segmentation – An Example

Porter Five Force Analysis

Bowman Strategy Clock

Bowman’s Strategy Clock

Making Sense of Eight Competitive Positions

In many open markets, most goods and services can be purchased from any number of companies, and customers have a tremendous amount of choice. It's the job of companies in the market to find their competitive edge and meet customers needs better than the next company. So, how, given the high degree of competitiveness among companies in a marketplace, does one company gain competitive advantage over the others? When there are only a finite number of unique products and services out there, how do different organizations sell basically the same things at different prices and with different degrees of success?
This is a classic question that has been asked for generations of business professionals. In 1980, Michael Porter published his seminal book, "Competitive Strategy: Techniques for Analyzing Industries and Competitors", where he reduced competition down to three classic strategies:
  • Cost leadership.
  • Product differentiation.
  • Market segmentation.

These generic strategies represented the three ways in which an organization could provide its customers with what they wanted at a better price, or more effectively than others. Essentially Porter maintained that companies compete either on price (cost), on perceived value (differentiation), or by focusing on a very specific customer (market segmentation).
Competing through lower prices or through offering more perceived value became a very popular way to think of competitive advantage. For many businesspeople, however, these strategies were a bit too general, and they wanted to think about different value and price combinations in more detail.
Looking at Porter's strategies in a different way, in 1996, Cliff Bowman and David Faulkner developed Bowman's Strategy Clock. This model of corporate strategy extends Porter's three strategic positions to eight, and explains the cost and perceived value combinations many firms use, as well as identifying the likelihood of success for each strategy.
Figure 1 below, represents Bowman's eight different strategies that are identified by varying levels of price and value

Position 1: Low Price/Low Value

Firms do not usually choose to compete in this category. This is the "bargain basement" bin and not a lot of companies want to be in this position. Rather it's a position they find themselves forced to compete in because their product lacks differentiated value. The only way to "make it" here is through cost effectively selling volume, and by continually attracting new customers. You won't be winning any customer loyalty contests, but you may be able to sustain yourself as long as you stay one step ahead of the consumer (we're not going to mention any names here!) Products are inferior but the prices are attractive enough to convince consumers to try them.once.


Position 2: Low Price

Companies competing in this category are the low cost leaders. These are the companies that drive prices down to bare minimums, and they balance very low margins with very high volume. If low cost leaders have large enough volume or strong strategic reasons for their position, they can sustain this approach and become a powerful force in the market. If they don't, they can trigger price wars that only benefit consumers, as the prices are unsustainable over anything but the shortest of terms. Walmart is a key example of a low price competitor that persuades suppliers to enter the low price arena with the promise of extremely high volumes.


Position 3: Hybrid (moderate price/moderate differentiation)

Hybrids are interesting companies. They offer products at a low cost, but offer products with a higher perceived value than thos of other low cost competitors. Volume is an issue here but these companies build a reputation of offering fair prices for reasonable goods. Good examples of companies that pursue this strategy are discount department stores. The quality and value is good and the consumer is assured of reasonable prices. This combination builds customer loyalty.


Position 4: Differentiation

Companies that differentiate offer their customers high perceived-value. To be able to afford to do this they either increase their price and sustain themselves through higher margins, or they keep their prices low and seek greater market share. Branding is important with differentiation strategies as it allows a company to become synonymous with quality as well as a price point. Nike is known for high quality and premium prices; Reebok is also a strong brand but it provides high value with a lower premium.


Position 5: Focused Differentiation

These are your designer products: High perceived value and high prices. Consumers will buy in this category based on perceived value alone. The product does not necessarily have to have any more real value, but the perception of value is enough to charge very large premiums. Think Gucci, Armani, Rolls Royce.clothes either cover you or they don't, and a car either gets you around the block or it doesn't. If you believe pulling up in your Rolls Royce Silver Shadow is worth 25 times more than in an economy Ford then you will pay the premium. Highly targeted markets and high margins are the ways these companies survive.


Position 6: Increased Price/Standard Product

Sometimes companies take a gamble and simply increase their prices without any increase to the value side of the equation. When the price increase is accepted, they enjoy higher profitability. When it isn't, their share of the market plummets, until they make an adjustment to their price or value. This strategy may work in the short term, but it is not a long-term proposition as an unjustified price premium will soon be discovered in a competitive market.


Position 7: High Price/Low Value

This is classic monopoly pricing, in a market where only one company offers the goods or service. As a monopolist, you don't have to be concerned about adding value because, if customers need what you offer, they will pay the price you set, period. Fortunately for consumers in a market economy, monopolies do not last very long, if they ever get started, and companies are forced to compete on a more level playing field.


Position 8: Low Value/Standard Price

Any company that pursues this type of strategy will lose market share. If you have a low value product, the only way you will sell it is on price. You can't sell day-old bread at fresh prices. Mark it down a few cents, and suddenly you have a viable product. That is the nature of consumer behavior, and you will not get around it, no matter how hard you try.

Positions 6, 7, and 8 are not viable competitive strategies in truly competitive marketplaces. Whenever price is greater than perceived value you have an uphill battle on your hands. There will always be competitors offering better quality products at lower prices so you have to have your value and price aligned correctly.

When considering which competitive strategy to pursue, here are some questions you should ask yourself.
If you intend to compete on price:
  • Are you a price leader?
  • Can you sustain a cost leader position? Can you control your costs and sustain a good margin?
  • Are you able to exploit all of the cost advantages available to you?
  • Can you balance low price against the perception of too low value?
  •  Is your cost advantage limited to one or a few small market segments? Are these segments capable of sustaining your business, given the volume and margins you project?

If you intend to compete on perceived value:
  • Do you have a well-identified target market?
  • Do you understand what your target market truly values?
  • Are you aware of the perceived value of your competitor's products?
  • Are there areas of differentiation that you can capitalize on that others cannot easily copy?
  • Do you have alternate methods of differentiation in the event you lose your competitive advantage in that area?

As you are analyzing how you'd like to position yourself, keep in mind your organizational competencies. While you may want to choose a focused differentiation strategy and market your "designer" goods, you need to understand that it takes a unique set of circumstances to establish that kind of reputation in the marketplace. You are better to compete in an area where your competitive strategy is congruent with your corporate strategy and competencies, the resources you have available to you, the environment in which you operate, and any market expectations you have already established.

Key Points:

Bowman's Strategy Clock is a very useful model to help you understand how companies compete in the marketplace. By looking at the different combinations of price and perceived value, you can begin to choose a position of competitive advantage that makes sense for you and your organization's competencies. This is a powerful way of looking at how to establish and sustain a competitive position in a market driven economy. By understanding these eight basic strategic positions, you can analyze and evaluate your current strategy and determine if adjustments might improve your overall competitive position.

Product Life Cycle - a Strategic View

Function of a Strategy
The primary purpose of a strategy is to provide the product manager with the direction to follow in managing business over the planning period. A successful strategy should satisfy three requirements.
  1. Strategy must help to achieve coordination among various functional areas of the organization.
  2. Strategy must clearly define how resources are to be allocated.
  3. Strategy must show hot it can lead to a superior market position
marketing strategy can be competitively sensible in 4 ways.
  1. When competitor cannot do it.
  2. When competitor will choose not to do.
  3. When competitor would be at a disadvantage if they chose to do it.
  4. Would cause gain if competitor chose to do it.
Elements of a product strategy 
A complete statement of a marketing strategy for a product consist of 7 parts.
  1. A statement of objective(s) the product should attain.
  2. Selection of strategic alternative(s).
  3. Selection of customer targets.
  4. Choice of competitor targets.
  5. Statement of core strategy
  6. Description of the supporting market mix.
  7. Description of the supporting functional program.

Product Strategy Over the Life Cycle
The product life-cycle concept suggests that differnet marketing strategies are needed at differnet stages of PLC.The PLC concept also highlights the importance of long-term planning for a new product, including retaliation of competition and its impact on profit and overall ROI at a later stages.

Important point is in PLC concept profit from a product reaches a peak level before sales reaches its peak.Generally growth stage brings profits.In the early part of Maturity stage profits reach peak level then sales approaches its peak.This is due to pricing strategies; enhances service and  required to counter competition.

PLC theory in Marketing Strategy
  • Introduction Stage: The acceptance of a new industrial product during introduction stage would depend on the customer's acceptance  inertia. This by and large depends on the value that customer would attach to the product in solving his problem.
    • Core Strategy at this stage
      • Skimming
        • Product feature based differential advantage allows high price
        • Market Segment : Pioneer or Early Adopters.
        • Price sensitivity: Insensitive
        • Useful when cost structure of product is largely variable cost not under pressure to cover large fixed costs.
        • Strategy successful when high entry barrier exists.
      • Penetration
        • Low price core strategy
        • Market Segment: Wider segment pursued.
        • Efforts to gain market share as quickly as possible.
        • Involves generic or product category marketing and spend heavily on trade oriented promotions.
        • Strategy is used when the lead in the market will likely be short-lived.
  • Growth Stage: The growth phase of the PLC actually encompasses 2 different kinds of market behaviour.
    • Early Growth - the phase just following the introductory phase
    • Late Growth - the phase in which the rapid increase in sales begin to flatten out.
    • Features of the growth phase
      • The number of competitors are growing
      • Customers becomes knowledgeable about product and availability leading to pressure on price.
      • Increase competition forces market segmentation becomes the key focus.
    • The strategic option followed by either a leader or a follower are are as follows

      • During the growth stage an industrial marketeer focuses on the below 3 key areas.
        • Improve product design; -> pack more value / benefit; Segment stretch 
        • Improve distribution; -> reach out to segment faster by facilitating product accessibility.
        • Reduce price and gain more volume.-> Improve economy of scale.
    • Maturity Stage: At this stage one needs to also review strategy using Ansoff matrix. In order to counter the competition and the consequent decline in profits the 3 steps that could be taken are as below. 
      • Enter new market / Segment / customers.
      • Keep the existing customer satisfied (improve service).
      • Cut internal cost to maintain the profits.-> reduce marketing, production, and other cost;  

      • Decline Stage: Either one should withdraw the product or develop a substitute. In Industrial marketing framework the decline is very rapid and this stage is shorter.
      To develop long-term product strategies for existing individual products and product lines, following tools are used to arrive at a decision on existing products.
      1. Product Evaluation Matrix: Evaluate the performance of all the existing products / product lines using this technique.
      2. Perceptual Mapping Technique: Examine the relative strength and weakness of company's product in comparison to competitors.
      3. Based on the above 2 analysis decide product strategy: 
        1. Whether to continue
        2. Whether to modify
        3. Whether to eliminate or drop the product.
        4. Whether to add new product or product line.

      Product Elimination
      If at all the company decides to eliminate the product / product line then the following factors needs to be considered.
      1. Will the customer relationship be affected?
      2. Will the profitability be affected due to change in overhead (fixed cost) allocation ?
      3. What will be the reaction of the employee?
      4. Will the sales of other products be affected?
      5. Is there a new product to replace the eliminated product?
      6. Will the company's image be affected?
      7. What will be the possible competitive reaction?
        International Product Life-Cycle The products that go through international trade cycle pass through four stages as below
        • Exporting Product: Exporting a successful product at home to a foreign country.
        • Localization in Foreign land: The parent country forms JV or partner or set up own base.
        • Cost optimization: Take advantage of lower input & labor cost becomes more effective.
        • Start importing back into home country: Internal competition. Pressure to develop new generation products.
        Locating Industrial Products on the PLC curve
        PLC of a particular industrial product would depend on factors like
        • Industry profits (as % of sales)
        • Rate of change in industry sales growth
        • Information about competitors
        The steps involved in locating a product in PLC are as follows.
        1. Develop a trend analysis.for the past 3-5 years
        2. Competitor analysis for market share; product performance; NPI; diversification or expansion plans
        3. Forecast sales / profit over 3-5 years
        4. From the above 3 steps fix a product's position in PLC curve.

        Porter 5-force analysis is also very handy is making a new product launch decision.

        Customer Value Analysis

        Customer Value Map

        Customer Value Analysis Map

        Customer Loyalty Map

        Customer Loyalty Market Research Map