Page 6 - Portfolio Analysis

In considering these findings it is important to understand that, if a product is differentiated so that it is competing in a definable, relevant market segment, then it is the market share of that segment that is important. Successful companies make almost all their profits from those products which dominate their market segment. However, the business which is the furthest experience curve must guard against complancy. Over time the gains from the experience curve effect diminish and competitors catch up. Moreover, experience curve advantages can be quickly lost if new technologies are developed and implemented. Thus it is evident that the concept of the experience curve is of fundamental importance to the BCG approach to portfolio management. Equally important is the concept of the product life cycle. PRODUCT LIFE CYCLE - PLC Today it is readily accepted that products and technologies have a recognisable life cycle. They are born, they grow, they reach maturity and then they die. FIGURE 3 PRODUCT LIFE CYCLE Sales and profits Maturity Growth Introduction Decline Sales Profit Time Life Cycle Stages Introduction