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CHAPTER 11
Portfolio Analysis and Strategic Market Planning
“Cheshire Puss, would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where—” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“—so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
— Lewis Carroll, Alice in
Wonderland
Quoting the above passage is a good way to open a discussion on strategic marketing planning. Each year, a
business needs to ask this same question: “Which way should we go from here?” And the answer “depends a
good deal on where” the business “wants to get to.” For marketing managers, this means understanding
current performance and the attractiveness of current market positions and then determining the desired
performance in 3 to 5 years. A business with the attitude that “it doesn’t matter which way we go” will fumble
along and eventually get somewhere if it fumbles along long enough.
Introduction
Anheuser-Busch has over the past 10 years engaged in a series of marketing plans to grow sales and profits.
Summarized here are several of its strategic marketing plans.
Protect Domestic Market Share in Core Markets – Anheuser-Busch is the share leader among nationally
distributed beers. Protecting its share of Bud and Bud Light is a core strategy in ensuring a major source of
cash flow and profitability.
Enter Emerging Segment of the Domestic Beer Market – Microbrew and imported beer customers are
growing market segments in which Anheuser-Busch previously did not have a presence. The introduction of
Michelob HefeWeizen and a strategic alliance with Red Hook have provided Anheuser-Busch entry into the
microbrew segment. A licensing agreement with Kirin, a well-known Japanese beer, has provided entry into
the imported beer segment.
Market Penetration of International Markets – Anheuser-Busch has gained a presence in the international
market as the distributor of Heineken, sold in 170 global markets. Aggressive entry into the European market
has already made Bud and Bud Light significant market forces there. China, with about 1 billion potential
customers, is projected to be the world’s largest beer market by the end of the century. Penetration of this
market is key to Anheuser-Busch’s long-run sales and profit growth.
Teaching Objectives
Introduce the concepts of portfolio analysis and strategic marketing plans. Present the importance of both
offensive and defensive strategic marketing plans in order to achieve overall business objectives of revenue
growth, share growth, and overall financial performance.
Discuss the importance of product diversification and market diversification and how each contributes to
growth while reducing risk and providing consistent performance.
Demonstrate the need for both offensive and defensive strategic marketing plans with respect to achieving
short- and long-run performance objectives in the areas of market share, revenue growth, and profits.
Harvard Business School Case Materials
Hewlett-Packard (A) (2006/2005). HBS Case 505065-PDF-ENG. Since its controversial merger with
Compaq, Hewlett-Packard had been under pressure by analysts and some stockholders to divest itself of its
low-margin PC business. For CEO Carly Fiorina and others on HP's management team, however, PCs
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seemed integral to the company's broader strategy of becoming more customer focused. In May 2004, with
HP's stock substantially undervalued, Mike Winkler, HP's chief marketing officer, was asked to weigh in on
the company's PC strategy going forward. Could HP serve its customers better with PCs or without them?
And if HP stayed in PCs, how should the company price them?
Marvel Enterprises, Inc. (Abridged) (2011). HBS Case 511097-PDF-ENG. The management team of
Marvel Enterprises, known for its universe of superhero characters that includes Spider-Man, the Hulk, and
X-Men, must reevaluate its marketing strategy. Originally known as a comic book publisher, the company
now also has highly profitable toy, motion picture, and consumer products licensing operations. However,
doubts about Marvel's business model and its growth potential continue to exist. Had Marvel's winning streak
been just a fluke? Was Marvel's success dependent on a limited set of blockbuster characters, most notably
Spider-Man, and should Marvel continue to capitalize on those characters? Or was it time to seek growth in
a larger set of lesser-known characters? In exploring growth opportunities, was it wise for Marvel to venture
outside its current business model and move into more capital-intensive activities? What marketing strategy
would allow Marvel to sustain its success in the coming years?
Robert Mondavi and the Wine Industry—2005. HBS Case No. 302102 (32 pages). Examines the
competitive challenges facing Robert Mondavi as the wine industry begins to consolidate globally. The
challenges are coming from new competitors entering the U.S. market and diversified global alcoholic
beverage companies entering the wine business.
Intel Corp. HBS Case No. 9-797-137. Traces Intel’s business development and strategies from 1968 to
1997. Examines the company’s exit from the CRAM market and entry into the microprocessor market. This
case focuses on strategy and planning and the need to develop a sustainable competitive advantage.
Calyx & Corolla. HBS Case No. 9-592-035. This 1991 case describes a new entry into the $8 billion U.S.
flower industry. Combining the use of overnight mail (FedEx), information technology, an 800 number, and a
catalog, Calyx & Corolla changed the way flowers are traditionally distributed, bypassing three layers of
distribution. Video: 9-592-509.
Arrow Electronics Inc. HBS Case No. 9-598-022. Arrow Electronics is a valued-added distributor of
commodity and differentiated electronics. An online distributor is now allowing Arrow to sell its commodity
electronics on the distributor’s e-marketing site. This move threatens Arrow’s overall business model if many
customers switch to the e-marketing channel. The case allows students to investigate the important
differences between offensive and defensive strategic marketing plans.
Market-Based Strategic Thinking
1. Why would Yum Brands divest such well-known store brands like A&W and Long John Silver’s?
2. Why did Toyota enter the U.S. car market at the low-price point of the market instead of the
mid-price or high-price point?
When Toyota first introduced its Japanese cars in the U.S. in the early 1960s,U.S. car buyers perceived
3. Why did Toyota add the Lexus and Scion product lines to its product portfolio as separate umbrella
brands instead of retaining an all-Toyota product line portfolio?
As the Toyota product line grew in price and performance, there came a point at which it was just below the
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segment. A new brand name (Lexus) was developed and positioned for the luxury segment, and the
For Scion, Toyota wanted to offer more options within its price-performance product line without confusing
4. How would Apple use the product life cycle that was used in this chapter to evaluate the current
and future sales and profits of a business’s portfolio of products?
Using the product life-cycle curve (PLC), Apple can infer sales and profits at different stages of the product
life cycle. Traditionally, early life-cycleproducts have lower sales and often low or negative profits. However,
5. What could be done with regard to Portfolio A in Figure 11-2 to make it a more balanced portfolio
over the next 3 to 5 years? How would this change affect short- and long-run sales and profits?
Portfolio A is presently too heavily concentrated with mature products. The business needs to invest in new
6. Why is it important to use two independent dimensions of performance to build a product portfolio
for Kellogg’s? Why would these performance dimensions be different for Netflix?
Market attractiveness is an assessment of the external market opportunity with respect to market size,
market growth, and competitive intensity. Competitive position is a separate and independent dimension
7. For Yum Brands, what is meant by a “strategic market plan”?
Understanding Yum Brands’performance (current and desired), market attractiveness, and competitive
position enables the company to conduct a portfolio analysis. Based on a combination of performance
8. For General Motors, what is the difference between market attractiveness and competitive position
with respect to building a product portfolio?
Both market attractiveness and competitive position are important, but they are quite different concepts.
For GM,the level of market attractiveness is an outcome of market forces, competitive environment, and
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position involves the degree to which products have some combination of differentiation position, cost
position, and marketing position (see Figure 11-11). For GM, when these factors combine to create a
9. How does a portfolio model based on product life cycle and the market share development index
help a growth business like Groupon.com?
Groupon.com could use this portfolio model to represent product-segments, such as restaurants, spas, and
10. Why would a business like Coca-Cola opt to use the GE/McKinsey portfolio model over other
portfolio models?
Although the PLC portfolio and the combination of the PLC and competitive position (market share index)
are very useful portfolio models, they do not take into account other important factors that should be
11. How would you assess the attractiveness of a new consumer product-market for Procter &
Gamble? List the specific factors you would include as you build an index of market attractiveness
for a Procter & Gamble consumer market.
P&G is renowned for introducing new products and brands to attract consumers. Based on the company’s
extensive experience,ithas undoubtedly identified the key success factors for an attractive market.Using
Figure 11-10, P&G could create specific market attractiveness factors for each of the three major
12. How would you assess the competitive position of Procter & Gamble in a new consumer
product-market? List the specific factors you would include as you build an index of competitive
position for a Procter & Gamble consumer market.
Using the criteria presented in Figure 11-12, P&G could assess each factor and compute individual indexes
13. Using the following information, create a portfolio analysis and specify a strategic market plan for a
business that serves the three product-markets A, B, and C.
Sales Market Competitive
Product-Market Share (%) ($ millions) Attractiveness Position
A 10 $20 20 40
B 33 $50 75 80
C 5 $10 85 15
Each of the three product-markets is positioned in the portfolio based on market attractiveness and
competitive advantage, as in Figure 11-8. The size of each product-market’s circle represents the relative
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importance of each with regard to sales revenues. Outlined here is one set of possible strategic marketing
plans.
14. Using the information presented in item 13 and the additional information that follows, create a
3-year performance plan with respect to market share and sales revenues for each product-market,
given the strategic market plan specified. Also create a projection of overall sales for each year of
the 3-year planning horizon.
Strategic Share Market Demand Market
Product Market Market Plan Objective (%) ($ millions) Growth (%)
A Optimize Position 5 $200 5
B Protect Share 33 $150 7
C Grow Share 10 $200 20
This set of strategic market plans will shift importance from product-market A to product-market C as the
business continues to protect product-market B. If implemented successfully, the three strategic market
Market Share Position:
Strategic MarketPlan Product-Market Current Year 1 Year 2 Year 3
Sales Growth (millions):
Strategic Market Plan Product-Market Current Year 1 Year 2 Year 3
15. Under what conditions would Apple use an offensive
strategic market plan?
For Apple, the shaded cells in the matrix at the right represent
strategic situations in which an offensive strategic market
16. Under what conditions would Apple opt to use a
defensive strategic market plan?
Here, the shaded cells represent situations in which a
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17. What role do offensive and defensive strategic market plans play in the short- and long-run
performance of Apple?
For Apple, offensive strategic market plans are inherently growth oriented and need a greater allocation of
resources, more so than defensive plans, in order to achieve long-run objectives. Thus, in the short run,
18. How does Apple’s level of product-market diversification affect sales growth and performance
consistency?
As illustrated in Figure 11-16,Apple performance variance in each separate product-market is averaged out
19. Why would the overall variation in sales revenues over a 10-year period be different between
General Electric and Dell?
Dell is dependent on one market, the personal computer market. A slowdown in the market growth or an
20. How would the sales and profit performance over a 3-year period differ between a business with
only defensive strategic market plans and a business with only offensive strategic market plans?
Why is it important for Dell to have a balance of offensive and defensive plans?
A business with only offensive strategic market plans would see improving market share and sales growth
21. How would an offensive strategic market plan and marketing budget for GE Appliances to grow
market share differ from those of a strategic market plan to optimize position and reduce share?
An offensive strategy to grow the market share of GE Appliances would have performance objectives built
around market share. The strategy and require a larger marketing and sales budget than a defensive
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