Product Portfolio Management Quiz

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Questions and Answers

What is the expected penetration for the meal package in February?

  • 10,000 meal packages
  • 11,200 meal packages
  • 13,800 meal packages
  • 12,600 meal packages (correct)

How many first-time triers of the meal package were there in August?

  • 14,400 first-time triers
  • 21,000 first-time triers
  • 6,600 first-time triers (correct)
  • 18,000 first-time triers

What is the volume projection for February if both the frequency of purchase and units per purchase is 1?

  • 12,600 packages (correct)
  • 15,200 packages
  • 10,000 packages
  • 18,000 packages

How many new customers were added for the meal package in September?

<p>6,600 new customers (D)</p> Signup and view all the answers

What is the repeat customer rate expected for the new meal package?

<p>80% (A)</p> Signup and view all the answers

What does a product portfolio comprise?

<p>Collections of products and businesses (A)</p> Signup and view all the answers

Which factor is not considered a key decision in product portfolio management?

<p>Deciding brand names for products (D)</p> Signup and view all the answers

In the BCG Matrix, which quadrant typically represents products with a high market growth rate and high relative market share?

<p>Star (B)</p> Signup and view all the answers

What does the term 'Dog' refer to in the BCG Matrix?

<p>Low-growth products with low market share (A)</p> Signup and view all the answers

How do decisions in product portfolio management evolve?

<p>They frequently adjust with changes in markets and customer needs (A)</p> Signup and view all the answers

What is the estimated trial rate for the new stapler based on the given percentages?

<p>25.5% (A)</p> Signup and view all the answers

What is the primary purpose of measuring growth rates?

<p>To measure growth and success (A)</p> Signup and view all the answers

How many first-time users are expected to try the stapler based on the adjusted trial rate?

<p>1,620,000 (A)</p> Signup and view all the answers

Which of the following formulas represents year-on-year growth?

<p>Value in t - Value in t-1 / Value in t-1 (D)</p> Signup and view all the answers

How many total staplers are projected to be purchased by repeat buyers in the first year?

<p>1,296,000 (A)</p> Signup and view all the answers

What is the total projected volume of staplers in year one?

<p>2,916,000 (A)</p> Signup and view all the answers

What does CAGR stand for?

<p>Compound Annual Growth Rate (C)</p> Signup and view all the answers

What is needed to calculate the Compound Annual Growth Rate (CAGR)?

<p>Values for the starting and end year (D)</p> Signup and view all the answers

What percentage of repeat buyers is expected in the first year?

<p>10% (C)</p> Signup and view all the answers

What factors could potentially lead to inaccuracies in volume projections?

<p>Inaccurate key assumptions (A)</p> Signup and view all the answers

What was the year-on-year growth percentage for Apple in 2008?

<p>23.9% (B)</p> Signup and view all the answers

What does a negative CAGR indicate?

<p>Decline in sales over the period (D)</p> Signup and view all the answers

How many occasions is each repeat buyer expected to purchase during the first year?

<p>4 occasions (B)</p> Signup and view all the answers

What is the estimated awareness level for the stapler based on the company's beliefs?

<p>65% (C)</p> Signup and view all the answers

Which years did the example provide Apple sales data for?

<p>2007 to 2010 (A)</p> Signup and view all the answers

What is the calculation result for the year-on-year growth of Apple sales in 2010?

<p>23% (C)</p> Signup and view all the answers

What is one of the limitations of the McKinsey Grid compared to the BCG Matrix?

<p>Inability to capture changes/trends in the market (C)</p> Signup and view all the answers

Which is NOT a purpose of volume projections in sales forecasting?

<p>To track competitors' market share (A)</p> Signup and view all the answers

How does the calculation for volume projection at time t incorporate first-time triers?

<p>By adding first-time triers to the penetration in previous periods (C)</p> Signup and view all the answers

In volume projections, what does the term 'frequency of purchase' refer to?

<p>The typical number of units purchased each time (B)</p> Signup and view all the answers

What is the primary method for tracking market changes when using the McKinsey Grid?

<p>Available market information (B)</p> Signup and view all the answers

What is a component of the volume projection formula for future sales?

<p>Penetration at time t-1 (D)</p> Signup and view all the answers

Which statement correctly reflects a strategy for flat screen TVs within the McKinsey Grid?

<p>Seek niches and consider acquisitions (A)</p> Signup and view all the answers

Volume projections for existing products are primarily used for which of the following?

<p>Establishing a comprehensive product launch timeline (C)</p> Signup and view all the answers

What is the formula to calculate Volume Projection in time t?

<p>Trial Volume in t + Repeat Volume in t (C)</p> Signup and view all the answers

How is Trial Volume in time t calculated?

<p>Trial Population in t * Units per purchase (D)</p> Signup and view all the answers

What factors contribute to the Adjusted Trial Rate?

<p>Trial Rate, Awareness, and ACV (B)</p> Signup and view all the answers

What is the purpose of calculating the Repeat Volume in time t?

<p>To estimate future sales from existing customers (A)</p> Signup and view all the answers

Which weight is typically assigned to 'definites' in the Trial Rate calculation?

<p>80% (A)</p> Signup and view all the answers

How is the Number of Repeat Buyers in time t calculated?

<p>Trial Population in t * Repeat Rate % (B)</p> Signup and view all the answers

What is the Repeat Volume in time t formula dependent on?

<p>Number of Repeat Buyers * Repeat Units volume per customer * Repeat Purchase Frequency (A)</p> Signup and view all the answers

What role does ACV play in volume projection calculations?

<p>It measures product availability in retailers. (B)</p> Signup and view all the answers

Flashcards

Product Portfolio

A collection of products and businesses that a company manages.

BCG Matrix

A tool used to analyze a company's product portfolio based on market growth rate and relative market share.

Stars

Products with a high market share in a high-growth market. Requires significant investment.

Question Marks

Products with a low market share in a high-growth market. Require careful assessment.

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Cash Cows

Products with a high market share in a low-growth market. Generate more cash than they consume.

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Market Penetration

The percentage of the market that purchases a particular product.

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Volume Projection

The number of units of a product that a company expects to sell in a given period.

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Repeat Customer Rate

The percentage of customers who return to purchase a product again.

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First-time Triers

The number of new customers who purchased a product for the first time.

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Frequency of Purchase

The rate at which customers repurchase a product. For example, a customer might subscribe to a meal service once a month.

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Trial Volume

The initial purchase volume of a new product in a given period

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Trial Population

Number of people from the target market who buy the new product for the first time in a period

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Trial Rate

Percentage of the target population who purchase the new product for the first time in a period

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Awareness

The percentage of the target population that is aware of the new product

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ACV (All Commodity Volume)

Percentage of retailers that carry the product

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Repeat Volume

Purchases of a product by customers who have previously bought it

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Repeat Rate

Percentage of trial customers who make a repeat purchase

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Growth Rate

A metric used to measure growth over a specific period, expressed as a percentage.

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Year-on-Year (YoY) Growth

Indicates growth from one year to the next, calculated by dividing the difference in value between two consecutive years by the value of the previous year.

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Compound Annual Growth Rate (CAGR)

Represents the average annual growth rate over a period of time, calculated by taking the nth root of the ratio of ending to beginning values, where n is the number of years. It assumes a constant growth rate.

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Growth Rate Construction

The calculation of the growth rate for a period of time. This is usually calculated by taking the difference between the current value and the previous value and dividing it by the previous value.

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Using Secondary Data & Past Experiences

A measure of growth calculated over a period of time, using previously released data or past experience with similar products. This can be helpful for predicting future growth or performance.

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McKinsey Grid

A strategic tool used to analyze the competitive landscape and identify opportunities for growth. It considers both the attractiveness of a market and the strength of a company within that market.

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Market Attractiveness

The horizontal axis of the McKinsey Grid representing the potential success and profitability of a specific market. It considers factors such as market size, growth rate, and competition.

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Company Strength

The vertical axis of the McKinsey Grid representing the competitive position of a company within a market. It considers factors such as market share, brand recognition, resources, and capabilities.

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Seek Niches

A strategic approach for companies in the lower right quadrant of the McKinsey Grid, characterized by weak competitive positions in attractive markets. It involves finding specific niches or competitive advantages within the market.

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Consider Acquisitions

A strategic approach for companies in the lower right quadrant of the McKinsey Grid, involving acquiring existing companies with stronger positions in the market.

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Volume Projection for an Existing Product

A method for projecting sales volume for an existing product by considering first-time buyers, repeat customers, and the frequency of purchases.

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Adjusted Trial Rate

The percentage of potential customers who, upon being made aware of your product, would be likely to purchase it if it was readily available.

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Repeat Buyers

Customers who have already bought the product once and are likely to purchase it again.

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Total Projected Volume

The overall projected sales volume of a product during a specific timeframe, typically a year. It encompasses both the initial sales from first-time buyers and the repeat purchases from existing customers.

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Sensitivity Analysis

A method of evaluating the reliability of predictions by considering multiple scenarios involving different assumptions, such as optimistic, moderate, and pessimistic estimates. This allows for a more comprehensive understanding of potential outcomes and risks.

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Study Notes

Product and Portfolio Management

  • Product portfolio is a collection of products and businesses.
  • Key decisions include allocating resources (cash, expertise, time) across products and deciding whether to invest or divest in them.
  • Market changes, product evolutions, and shifts in customer preferences affect these decisions.

Boston Consulting Group (BCG) Matrix

  • This matrix is used to evaluate the attractiveness of a product in relation to relative market share strength.
  • It uses a 2x2 matrix with market growth rate (vertical axis) and relative market share (horizontal axis).
  • Four quadrants represent different product categories:
    • Star: High market growth rate, high relative market share.
    • Cash Cow: Low market growth rate, high relative market share.
    • Dog: Low market growth rate, low relative market share.
    • Question Mark: High market growth rate, low relative market share.

BCG Matrix – Limitations

  • Market attractiveness depends on factors beyond growth rate, including competitive intensity and market size.
  • Strength depends on attributes beyond market share, such as R&D and marketing capabilities.
  • Market share is a cost-based advantage indicator.
  • Cut-off values on the matrix axes are arbitrary.
  • Synergies between products are not accounted for.

GE/McKinsey Portfolio Planning Grid

  • This grid analyzes market attractiveness and business strength.
  • Market attractiveness factors include market growth, market size, profit margins, competitive intensity, market entry barriers, cyclicality of product life cycle and environmental impact.
  • Business strength factors include market share, product quality, R&D capabilities, marketing capabilities, brand awareness, production capabilities, and cost efficiency.
  • This matrix differs from BCG by including broader attributes.

Evaluating Attractiveness: Flat Screen TVs

  • The document provides a detailed analysis on the attractiveness and market position of Flat Screen TVs.
  • Critical criteria like market growth, market size, competitive intensity, profit margins, and market entry barriers were considered to assess attractiveness.
  • The document provides a step by step assessment of these specific factors and evaluation methods.

Evaluating Strength: Flat Screen TVs

  • The study documents steps to evaluate the relative competitive strength of flat-screen TVs.
  • Factors analyzed include market share, research and development capabilities, marketing capabilities, distribution, and production capabilities.
  • The documents detail the factors, evaluation process and outcome for each one of these factors.

McKinsey Grid: Flat screen TVs

  • A visual representation of consumer electronic company's flat screen TVs using a two-axis matrix showing market attractiveness versus relative competitive strength.
  • Provides a visual overview of which products are performing well and which are not.

Volume Projections: Purpose

  • Forecasting sales by understanding customer intentions, with data from surveys and market research.
  • Crucial during early product development to set a product launch schedule.
  • Proper penetration in the market means considering both new ('triers') and existing ('repeat') customers.

Volume Projection for an Existing Product: Construction

  • This section details the volume projection methodology.
  • New penetration is a function of existing penetration, repeat rate and new customers.

Volume Projection for a New Product: Construction

  • This section lays out the construction method for new product volume projections.
  • The method considers trial volume and repeat volume.
  • Key terms such as trial population, trial rate, awareness, and ACV are defined.

Volume Projections: Caution

  • Volume projections need crucial assumptions (e.g., customer expectations or awareness).
  • Sensitivity analysis is essential to test the robustness of these assumptions.
  • Determining trial and repeat rates can be challenging.
  • Secondary data and past product experiences are helpful.

Growth Rates: Purpose

  • Measuring growth patterns (monthly, seasonal, yearly) and periods.
  • Understanding business success or failure is often tied to growth.

Growth Rates: Construction

  • Calculate year-on-year growth using the formula: (Value in t - Value in t-1) / Value in t-1
  • Calculate compound annual growth rate to find average growth over a given period.

Growth Rates: Example

  • This section provides an example of calculating year-on-year and compound annual growth rates for Apple sales.

Growth Rates: Cautions

  • Adjusting growth rates for various influencing factors like store expansion, salesperson numbers, or new market expansions is vital.
  • Focusing on 'same-store sales' growth is a significantly more useful metric for analyzing retail growth

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