Product Portfolio Strategies: The Case of Multifunction Products

• 成果类型: Article
• 署名作者: Chen, Yuwen; Vakharia, Asoo J.; Alptekinoglu, Aydin
• 署名单位: University of Rhode Island; State University System of Florida; University of Florida; Southern Methodist University
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.3401/poms.1080.0064
• 发表日期: 2008
• 页码: 587-598
• 关键词: product functionalities; multifunction products; product protfolios; quantity and pricing decisions

摘要

Motivated by the proliferation of multifunction products, we investigate product portfolio decisions of a single firm by analyzing the impact of three major factors. First, because multifunction products provide complete or partial functionalities of single-function products, we incorporate substitution or cannibalization effects between the potential products. Second, we explicitly model the variable costs of manufacturing the single-function and multifunction products. Third, we examine the firm's pricing decisions because of their impact on the degree of cannibalization between the multifunction product and one or more single-function products. Using an economic model, we first characterize the firm's optimal product portfolio (through a quantity-based decision), which in turn determines the market equilibrium prices for each product in its portfolio. Some of the unique insights stemming from our analysis are: (a) the optimal product portfolio choice is driven primarily by maximum profit margins for the single-function products weighted by the demand substitution effects; and (6) from a product design perspective, the complete functionality of the base single-function product is always included in the optimal product offering, but this is not necessarily the case with the complete functionality of the nonbase single-function product.