Dynamic Product Portfolio Management with Life Cycle Considerations

In order to be pro table, companies have to continuously manage their portfolio of product lines. At the same time, demand for products varies across di erent life cycle stages. Disregarding these variations may result in high operational costs due to inadequate ordering decisions and revenue shortfalls. In a portfolio of product lines, the product life cycle acquires even more relevance because the upper and lower extremes of demand and revenue may occur simultaneously in multiple product lines and thus be magni ed. Therefore, companies may want to smooth the overall levels of demand and revenue by actively managing their portfolio, properly timing product upgrade launches and adequately choosing the amount and timing of marketing support. This is particularly true for products with short life cycles such as high technology goods, consumer electronics, and fashion apparel, for which the life cycle is the main source of demand dynamics. When rms are nancially constrained in making needed investments yet still have to manage multiple products through various life cycle stages, achieving optimal inventory, product launch and marketing support decisions becomes complex.