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Product Life Cycle Matrix in Strategic Management

The product life cycle portfolio matrix addresses limitations of the BCG matrix by focusing on growth and maturity stages, acknowledging that products have finite life spans and require strategic adjustments as they progress. It categorizes products into 'warhorses', 'dodos', and 'infants', each with distinct strategies based on market share and growth potential. While the matrix aims to provide a comprehensive framework for analyzing market situations and cash flow potential, its effectiveness relies on accurate input data.

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36 views6 pages

Product Life Cycle Matrix in Strategic Management

The product life cycle portfolio matrix addresses limitations of the BCG matrix by focusing on growth and maturity stages, acknowledging that products have finite life spans and require strategic adjustments as they progress. It categorizes products into 'warhorses', 'dodos', and 'infants', each with distinct strategies based on market share and growth potential. While the matrix aims to provide a comprehensive framework for analyzing market situations and cash flow potential, its effectiveness relies on accurate input data.

Uploaded by

abhishekpundir37
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© © All Rights Reserved
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Product Life cycle Matrix in

Strategic Management

The product life cycle portfolio matrix is specifically designed to deal with the criticisms
that the BCG matrix ignores products that are new, and that it overlooks markets with a
negative growth rate, i.e. markets that are in decline. Because of this, the product life
cycle portfolio matrix includes a specific focus on the growth and maturity stages of the
product life cycle in developing the portfolio technique. However, the same assumptions
that underlie both the conventional product life cycle experience curves and the BCG
growth/share matrix are also built into this model. These assumptions, which we have
already witnessed, are repeated:
Product Life Cycle Matrix
• Products have finite life spans. They enter the market, pass through a period of growth, reach a stage of
maturity, subsequently move into a period of decline and finally disappear.
• Strategic objectives and marketing strategy should match the market growth rate changes to take advantage
of the challenges and opportunities as the product goes through the different stages.
• For most mass-produced products, costs of production are closely linked to experience (volume). Hence, for
most types of products, the unit cost goes down as volume increases.
• Expenditures – investment in plant and equipment and marketing expenses are directly related to rate of
growth. Consequently, products in growth markets will use more resources than products in mature markets.
• Margins and the cash generated are positively related to share of the market. Products with high relative
share of the market will be more profitable than products with low shares.
• When the maturity stage is reached, products with high market share generate a stream of cash greater than
that needed to support them in the market. This cash is available for investment in other products or in
research and development to create new products.
Product Life cycle Matrix
• Warhorses
• When a market begins to exhibit negative growth, cash cows become warhorses. These products still
have high market share and hence can still be substantial cash generators. This might require reduced
marketing expenditure or it may take the form of selective withdrawal from market segments or
elimination of certain models.
• Dodos
• These are products that have low shares of declining markets with little opportunity for growth or
cash generation. The appropriate strategy is to remove them from the portfolio, but if competitors
have already removed themselves from the market it may still be marginally profitable to remain.
Timing is thus crucial.
• Infants
• These are pioneering products that possess a high degree of risk. They do not immediately earn
profits and consume substantial cash resources. The length of the innovation can vary from a short
time with consumer packaged goods to an extended period with a product that is innovative enough
to require a shift in buying habits.
Barksdale and Harris combined PLC/BCG matrix
Life Cycle Portfolio Matrix
Product life cycle portfolio matrix

Product Life
• Uses and limitations of the product life cycle portfolio matrix
• The developers of the matrix claim that it is comprehensive. Regardless of the level of analysis
– corporate, business division or product/market categories – they suggest that the expanded
model provides an improved system for classifying and analysing the full range of market
situations. Classification of products according to this expanded model is meant to reveal the
relative competitive position of products, indicate the rate of market growth and enable the
configuration of strategic alternatives in a general sense if not in specific terms.
• The key here is that it is only ‘general’. Barksdale and Harris admit that the new matrix does
not eliminate the problems involved in defining, say, products and markets, or rates of growth.
As with the other strategic planning tools, the benefits a company can achieve are only as
good as the inputs upon which they are based.
• It is claimed that it provides an improved framework that identifies the cash flow potential and
the investment opportunity for every product offered by an organization. In addition, it helps
conceptualize the strategic alternatives of all product/market categories of an organization.

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