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MKTM028 Marketing Strategy For Product Portfolio Management

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Questions:

a) Justify, using robust practical and theoretical evidence, the application of marketing across a variety of orgainisational contexts

b) Critically select and apply relevant marketing theories, conceptual models and frameworks in the development of marketing strategies within a dynamic business environment to produce superior marketplace performance

c) Demonstrate knowledge applied to evaluate marketing practice in relation to the cross-functional aspects of business & management with the goal of enhancing long-term shareholder value

d) Demonstrate an ability to work effectively in a leadership role in order to carry out marketing tasks linking theory to practice

Answers:

Introduction

The essay revolves around the concept of strategic management, and it has been used for evaluating the various aspects of the marketing and the philosophies associated with it considering the business organisations Nestle and Apple. The management of strategies is an important concept of making sure that the organisations function properly as well as ensure making a good amount of profit along with gaining competitive advantage in business. Both the organisations Nestle and Apple are well known and have established themselves by creating a sustainable position within the market place, because of which multiple products and services are offered by the companies.

The product portfolio and product life cycle have been demonstrated for managing the strategies in an efficient way and ensure that not all these are at the same phases of the life cycle of each of the product (apple.com, 2017). The balance product portfolio is presented for making sure that all the financial resources and human resources including the employees and organisational staffs are managed properly. On the other hand, the product life cycles have helped in establishing a good relationship, applied the marketing models to the products and services delivered, and generated good amounts of revenue with much convenience.

Body

The strategic management is an effective way of formulating and implementing the goals and objectives, which are to be achieved. The initiatives are taken by the top management level of the company. It is done by considering all the resources and by assessing the internal and external environment within which the organisations compete. This effective method also helps in providing a direction to the organisations and allows them to reach the goals and objectives with ease. Baker,M.J.(2014) stated that there are certain plans and policies developed for accomplishing the objectives through the allocation of resources. The strategic management technique also utilizes the feedback loop for monitoring the execution and plan for the next implementation (Babatundeand Adebisi,2012).

Based on the SWOT analysis, the company's strengths, weaknesses, opportunities and threats are understood. The company has managed to operate within different segments of the market for delivering bottled water, cereals, candy, coffee, chocolate, health and nutrition products and other dairy products (Bharadwajet al.2013). The strengths include its ability to diversify products and operate in different markets, good relationship with powerful brands like Coca-cola, General Mills, etc., good research and development abilities, strong relationship with retailers and huge market share in some economies of countries like Europe and United States of America. According to Eden, C. (2013), there are few weaknesses as well like lack of time to respond to changes in behaviours of consumers suddenly.

The costs increase too while launching a new brand and replace existing brand products.  The opportunities are though grabbed by Nestle correctly by opening up new channels for distribution of products through online retail (Hollensen, 2015). The competitiveness from large retailers has also made the company cut down prices. The Government proposed various rules and regulations, and this resulted in stopping the delivery of Nestlé's major product Maggi due to allegations regarding excessive amounts of lead found in the food item (Eggers, 2012 p 315-335).


The strategic roadmap for Apple is created by analysing the strengths, weaknesses, opportunities and threats with the use of SWOT analysis. Apple has used the budget of advertising wisely, because of which the costs of production are quite low when compared with other competitors in business (Gumz, 2017 p 334). The company possessed strong and effective channels of distribution like the online stores, direct sales and retail stores, which have attracted many customers towards the company. The vertical integration is helping Apple to control the entire supply chain, and this will surely enhance its brand awareness and reputation (Heracleous, 2013 p 92-99). Few weaknesses include an extreme dependency on the sales of iPhone and it accounts nearly 66 percent of the total sales of the company. The distribution channels are though strong in US and UK markets, but in India, it is quite weak.

The research and development expenditures are low and the operating system of Apple’s products iOS is quite different from other operating systems, which make many customers choose other products. Prices are also high when compared with similar kinds of products of other companies. The Internet of Things or IoT market has grown largely, which has provided immense opportunities for Apple to integrate its system in a particular environment through internet connectivity (Hill, Jones and Schilling, 2014). The health related gadgets like Apple Watch can allow making calls as well as record intake of calorie, level of sugar and hydration, heart rate and blood pressure level. Apple has launched a personalised application that allows people to use effective transactional mobile applications with ease. The major threats faced by Apple are its competitive rivalries such as IBM, Microsoft, HP, Dell, etc. and the exchange rates. There are lawsuits over infringement of patents, which often results in deteriorating the brand status and image (Hitt, Ireland and Hoskisson, 2014).

BCG matrix for Nestle

The product portfolio management theory is used to plot the various units according to the market share, which is done by measuring the competitive position of Nestle and Apple in terms of its competitors in business. The BCG matrix is used for determining the stars, question marks, cash cows and dogs. The portfolio theory is considered as an effective strategy, which follows the acquisition to manage diversification of products and services. The resources are allocated properly in each of the units of profit growth share matrix (Kapferer, 2012).  The restructuring enables to identify any potential and check out whether it needs replacement or not through the implementation of a new business strategy. Grant, R.M. (2016) stated that the skills are transferred for gaining the competitive advantage while activities are shared for influencing the centralised functions like finance, sales and manage the reduction of costs in an effective manner (Killenet al. 2012 p 525-538).

This has helped Nestle to reduce its time to develop new products and services and enhance the performances of resources by ensuring that the strategies in business are feasible. The BCG matrix for Nestle is used to identify the priorities for the portfolio of product and develop plans for determining the amount of fund and ways of funding. The product portfolio is also considered as useful for long-term value creation for Nestle. The BCG matrix consists of stars, which include the products of the company such as Nescafe and Cereals, which have high growth market and market share. The question marks are the products with fewer shares of the market and high growth market, and it includes Nescafe Decaf, Nestum, Nesquick, etc. The cash cows are the products which are most popular products of Nestle, though with lesser growth rate but high market share value. It includes KitKat, Maggi noodles (Kumarand Reinartz, 2012). The dogs have low market share, and low market growth and few of the products included here are Nestea, Milky bar, Nestle munches. This kind of matrix has allowed the company to estimate the revenue, which should be generated in the future, as well as the products, which should be removed from the stock. One example is the cash cows, which includes Maggi noodles and Kitkat and these can generate good amounts of profit, thereby making the organisation obtain a surplus amount of money, that can be used for financing other products that are made available in the market (Lasserre, 2012).

The strategic roadmap for Nestle helps in focusing on the actual purpose and maintains good values and ethics within the organisation. The roadmap shows how the company can achieve its objectives and remain in a good position through consideration of various effective strategies and by obtaining a competitive advantage. The strategic roadmap consists of operational pillars, drivers or factors that enable growth within companies and competitive advantages (Morschett, Schramm-Klein and Zentes,2015). The pillars of involvement of customers, which can be done by making them aware of the new products and services offered, make the products available sustainably so that those are readily available from the customers. The products are innovated and redesigned with the addition of more nutritional value, which can make the customers engaged and furthermore influence their buying behavior (Nestle.com, 2017).

The growth drivers are health and wellbeing of consumers, which is possible by providing tasty and healthy food items, positioning of products in market segments properly and making premium food items available for enhancing the lives of customers. The things, which can help Nestle to gain a competitive edge over its competitors, are good brand image and identity, vast skills of research and development, excellent geographic presence for building good relationships between brand and consumers and maintaining rich culture and openness, share values and beliefs and even respect the diversity (Palia, De Ryckand Mak, 2014).

The bubbles marked in green are the big bets like Nestlé’s coffee products, Nestea, Kitkat, etc. which can generate high amounts of sales for the company. The bubbles in orange show the line extensions such as the drinks, ice cream, pet care products, etc. The brown bubbles show the products of Nestle, which are not much popular among the brand like the weight management, recipes, frozen food items, etc. Grant, R.M. (2016) illustrated that these kinds of products are of lower values and are subjected to face low as well as high risks based on the situation and market conditions. On the other hand, the big bets are found in the higher value categories, because of their significance and ability to capture wider market segments (Patanakul and Shenhar, 2012 p 4-20). With the sales of these products, the company can either generate good amounts of revenue or lead to formation of higher risks in business.

Product life cycle of Apple

The introduction stage is when Apple launched the first iPod by developing a commercial campaign for spreading product awareness among the customers. It was designed in such a manner so that customers can enjoy music on the go and create personalised music library with ease. It appealed a huge group of customers, and it easily grabbed the attention of existing customers of Apple and developed stages for future growth and development in business. Since the launch of Apple's iPod, the mini, nano and touch were introduced in the market that helped in increasing the market share. With the immense popularity of the iPod, the company soon gained pace and launched their first smartphone iPhone for getting into new markets through inbound and outbound techniques (Rosenbaum-Elliottet al., 2015).

During the decline stage, Apple managed to create new scopes for entering the newer market and attract new customers. The decline stage also enabled the company Apple to innovate, lead to a redesign of products and services, make changes in the functionality of the product for making the most of the product lifecycle, and ensure delivery of a new range of products in the market with ease and effectiveness (Rothaermel, 2015).

For Apple, the big bets are iPhone, which have been getting major improvements from time to time and has created an astonishing market presence. The big bets are represented as green bubbles and have higher value. With its innovative features and robust quality, the iPhones have been a boon for many people all over the world.These products of the company are of high value and are subjected to high as well as lower risks depending upon the conditions of market (Sethi, 2012). The line extensions are shown as yellow bubbles, which have lower value, though are subjected to both higher and lower risks. The line extensions for Apple are iPad Mini, Apple TV, which are new in the market and have lower value, when compared to the values offered by the big bets. The brown bubbles have lower value like Mac Books, which are gaining popularity and has enabled many individuals to experience something new and innovative with the use of iOS operating system. The Macbook, macOS, Apple watch fall into the others category and these have lower value and can often lead to higher risks, in case the products are sold in less numbers (Verhoefet al.,2009 p 31-41)

BCG matrix for Apple

The BCG matrix includes stars, question marks, cash cows and dogs. The rising stars here are the iPad and iPhone, which have huge market growth and share, as a result of which these have become quite successful, and potential success chances are quite high. The question marks are Apple TV, which has been unable to experience market growth and had a lower market share (Wheelenand Hunger, 2017). The cash cows include the products in low growth markets with high market share such as the Macbooks. The Mac Book is quite convenient because of its portability and ease of use with some enhanced and innovative features, which are not found in similar kinds of products of other companies. The dogs represent the products and services of Apple in a low growth market with low market share (Palma-Behnke et al. 2013). Nowadays, desktop computers are fading away; rather portable devices are becoming more popular. The Mac books offered by Apple offer extensive features and have a different operating system, which is often difficult to access (Babatundeand Adebisi, 2012). It is not a market leader in this product segment, as there are other companies, which offer same kinds of laptops with better functionality and features within a reasonable price range when compared with Apple's Mac book. Thus, the Mac books fall in the dogs’ category in the BCG matrix.

The BCG matrix showed that the company must provide financial help to the stars’ products and make it more convenient for the customers by making those available at a lesser price. This would generate customer satisfaction and draw in new clients, thereby improving the level of profit for the company too. The ways by which Nestle and Apple have applied the concepts of portfolio management are illustrated below with the help of suitable diagrams. The rising stars are the iPhones while the cash cows include laptops, which have been drawing more profit from time to time for Apple. The question marks include Apple TV tuner, which have high growth markets but less market share (Baker, 2014). The dogs include iPod and other devices, which have lower market share as well as lower market growth. With advancement in technology, the new products of Apple are preferred over the existing products.

Product Portfolio Management

The BCG matrix is developed for determining the priorities that shall be given to the product portfolio and make proper plans about how to fund and how much funding is needed to be done. It is important to create a product portfolio for the purpose of creation of long-term value and gain good amounts of profit in business.

Stars–According to Sethi. S.P. (2012), stars are the products of Nestle that are present in high growth markets and have a good amount of market share as well. Nescafe coffee and ceralac are the stars.

Question marks - Question marks include products in high growth markets with very less market share. This includes Nescafe Decaf, Nesquik, Nestle Nestum, Smarties, etc.

Cash cows - The cash cows represent products with low growth but high market share, and it includes Maggi noodles, kit kat.

Dogs - The dogs are the products with both low growth and market share. The products of this category include Nestea, Milky bar, Nestle munchies, etc (Killenet al., 2012).

The product life cycle consists of introduction, growth, maturity and decline. It could be seen from the life cycle model that Apple first introduced iPod for the music lovers and then it slowly managed to grow with the introduction of new products like iPhone, Macbook. The maturity stage is the current stage where new and enhanced features phones are introduced. Apple has recently launched the iPhone 7, which is one of the best smartphones until date(Kumar and Reinartz, 2012). The decline stage includes the first iPhone, which has been getting small market share and lower growth due to the delivery of new and innovative smartphones consisting of excellent features like water resistant, full 4k video recording, great pixel per density and a much larger battery life.

The relationship approach allows for development of direct responses from the customers through the help of marketing campaigns. This is done for attracting and retaining customers and thereby allows them to access the products and services, which can fulfill their needs and requirements. The relationship approach to marketing helps in determining the long term value of the relationship with customers and manage proper communication between the organization and its customers thorough various advertising and promotional activities. With the advancement in technology and communication, the internet has played a vital role in promoting open and collaborative communication. The tools of relationship approach to marketing are also used for going beyond the demographic and customer service data and manage inbound marketing efforts by combining the search engine optimization and strategic content (Killenet al., 2012 p 525-538). The involvement of social media and development of applications can also help in communicating with the customers and develop healthy relationships with them in an effective manner.

Few recommendations have been provided below:

  • In order to turn question marks into stars, it is recommended for Apple to advertise and promote Apple TV products properly for attracting a large customer base.
  • Apple is recommended to enhance the production of stars, i.e., iPhones and make sure that enough profit is generated just as the cash cows.
  • In order to keep the cash cows alive, it is important for Apple to innovate the products on a consistent basis and influence the buying behavior of consumers, thereby allowing them to make regular purchases from the company.
  • The iPad’s transition from rising star to cash cow can result from less investments in the product portfolio.
  • It is recommended to reduce the market shares and stabilize the intensity of  competition in order to turn stars into cash cows and ensure that the products offered have a leading edge over the competitors.
  • The implementation of advanced technologies can help in managing data driven business and make necessary changes manually for improving the process of automation and strategic planning.
  • Nestle will have to focus on initiating different innovative strategies to utilize the growing market in an effective way.
  • Nestle will also need to use all its prime products or brands to enhance the market penetration level to remain in the Star position for a long period of time.
  • Nestle also need to focus on introducing different new brands and product offerings to ensure continues success in the market.

Conclusion

The essay was presented for discussing the most important aspects of strategic management considering the business organisations Nestle and Apple. The importance of business strategies from the marketing perspective was included in this essay for enhancing the market performance as well as creates a sustainable place in the market. An effective framework for strategies had been established with the help of analysing the strengths, weaknesses, opportunities and threats of the both the companies. The marketing approaches, which could help in overcoming the weaknesses, had been presented here too. The strategic roadmap of Nestle had been established with the use of BCG matrix while on the other hand, the BCG matrix for Apple had been included here as well. The life cycle of products of Apple, i.e., from its introduction of iPod to the growth and maturity with the introduction of iPhones, to the decline, were parts of the essay as well.

Lastly, the portfolio management was demonstrated, with the presentation of graphical images for understanding about the topic and deriving a right conclusion in the end.  As both these organisations deliver multiple products among various categories, thus these have been managed in such a manner so that none are present in the same phases of the life cycle of products (Hollensen, 2015 p257). The balanced portfolio has helped in utilising the financial and human resources with ease and effectiveness too. The multiple products provided by the two companies and how these fared in terms of business perspective have been represented as portfolio bubble charts for easy understanding.

References:

apple.com. (2017). Apple. [online] Available at: https://www.apple.com/ [Accessed 12 Jul. 2017].

Babatunde, B.O. and Adebisi, A.O., 2012. Strategic Environmental Scanning and Organization Performance in a Competitive Business Environment. Economic Insights-Trends & Challenges, 64(1).

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Bharadwaj, A., El Sawy, O.A., Pavlou, P.A. and Venkatraman, N.V., 2013. Digital business strategy: toward a next generation of insights.

Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J., 1997. Portfolio management in new product development: Lessons from the leaders—I. Research-Technology Management, 40(5), pp.16-28.

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Eggers, J.P., 2012. All experience is not created equal: learning, adapting, and focusing in product portfolio management. Strategic Management Journal, 33(3), pp.315-335.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Gumz, J., 2017. Managing Change. Project Portfolio Management Strategies for Effective Organizational Operations, p.334.

Heracleous, L., 2013. Quantum strategy at Apple Inc. Organizational Dynamics, 42(2), pp.92-99.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.

Hollensen, S. (2015) Marketing Management: A relationship approach. 3rd ed. Harlow Pearson.

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Killen, C.P., Jugdev, K., Drouin, N. and Petit, Y., 2012. Advancing project and portfolio management research: Applying strategic management theories. International Journal of Project Management, 30(5), pp.525-538.

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Lasserre, P., 2012. Global strategic management. Palgrave Macmillan.

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Sethi, S.P., 2012. Multinational corporations and the impact of public advocacy on corporate strategy: Nestle and the infant formula controversy(Vol. 6). Springer Science & Business Media.

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Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. pearson.

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