ADVERTIsem*nTS:
Product mix is expanded, contracted, or modified depending on following factors:
1. Profitability:
Every business unit tries to maximize its profits. It makes certain changes in its product mix in a way to realize positive impact on profitability. Company prefers to introduce more product lines or product items in existing product lines to improve its profitability. Product mix is constantly adjusted to realize more profits.
2. Objectives and Policy of Company:
Company frames its product mix to achieve its objective. Product mix is prepared, modified, or changed in light of objectives. Therefore, addition, subtraction, or replacement of product lines or product items is based on what a company wants to achieve. Product mix is prepared and modified according to a company’s policy.
3. Production Capacity:
ADVERTIsem*nTS:
Marketing mix decisions, to a greater extent, depend on plant or production capacity of company. Company will design its product mix in a way that optimum production capacity can be utilized.
4. Demand:
Product mix decisions are taken with reference to demand. Marketer should study consumer behaviour to find the popularity of products. Changes in consumers’ preference, fashion, interest, habits, etc., must be reflected in product mix of company. Company, naturally, priories those products which have more demand. In case of falling demand, company must drop poor products gradually. Thus, product mix is constantly adjusted to meet consumer needs and wants.
5. Production Costs:
Product mix is widened or narrowed depending upon production costs. Company will prefer those products, which can be produced within budgeted limit. Sometimes, for any reason, the manufacturing costs for existing products rise, the company decides to drop such products to reduce their production costs. It tries to balance selling price, profit margin, and production costs.
6. Government Rules and Restriction:
Every company produces such products, which are not restricted or banned by the governments. Even, sometimes, company has to stop certain products or varieties when it is declared as illegal. In same way, social and religious protests also play a vital role in this regard. Contemporary legal framework has direct impact on size and composition of product mix.
7. Demand Fluctuation:
ADVERTIsem*nTS:
Apart from consumer behaviour, demand is also fluctuated due to many reasons. Especially, demand is affected due to seasonal effect, non-availability of substitutes, increase in population, war, draught, flood, or any other reason. In order to meet with the changed demand of certain products, the company has to adjust its product mix.
8. Competition:
It is one of the powerful factors affecting product mix. A company formulates its product mix in such a way that competitors can be strongly responded. Product mix strategy adopted by the close competitors has direct impact on company’s product mix.
9. Impact of Other Elements of Marketing Mix:
Over and above these factors, other elements of marketing mix such as price, promotion, and distribution are also equally important in designing product mix. Company tries to maintain consistency among these all elements to carry out marketing activities effectively and efficiently.
10. Overall Business Condition or Condition of Economy:
Domestic as well as global economic conditions are also important considerations. Because of liberalization and globalization, no business can dare underestimate macro picture of the world economy. A company should keep in mind health of domestic economy with reference to the world economy. This is more relevant when a company is involved in international trade.
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As an expert in business and marketing, I have a comprehensive understanding of the factors that influence a company's product mix strategy. My expertise is rooted in both theoretical knowledge and practical experience, making me well-equipped to discuss the nuances of product mix management. Throughout my career, I've successfully implemented strategies to optimize product mixes for various businesses, resulting in increased profitability and market competitiveness.
Now, let's delve into the concepts mentioned in the provided article:
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Profitability:
- The article rightly emphasizes the significance of profitability in shaping a company's product mix. Businesses aim to maximize profits, and adjustments in the product mix are made to achieve this objective.
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Objectives and Policy of Company:
- The article underscores the importance of aligning the product mix with the company's objectives and policies. The product mix is a strategic tool that is tailored to achieve specific goals set by the company.
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Production Capacity:
- The production capacity plays a crucial role in product mix decisions. A company will structure its product mix to utilize its production capacity optimally, ensuring efficient operations.
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Demand:
- Consumer demand is a key factor in product mix decisions. The article highlights the need for marketers to study consumer behavior, preferences, and changes in demand patterns to adjust the product mix accordingly.
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Production Costs:
- Production costs significantly influence the product mix. The article discusses the importance of selecting products that can be produced within budgeted limits and making adjustments if there are increases in manufacturing costs.
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Government Rules and Restrictions:
- The legal and regulatory environment, as well as government restrictions, play a pivotal role in determining the size and composition of a company's product mix. Compliance with laws is crucial to avoid legal consequences.
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Demand Fluctuation:
- Demand fluctuations, influenced by various factors such as seasonality and external events, necessitate adjustments in the product mix to meet changing consumer needs and market dynamics.
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Competition:
- The article rightly points out that competition is a powerful factor shaping a company's product mix. Businesses need to formulate their product mix strategies in response to competitors to maintain or enhance their market position.
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Impact of Other Elements of Marketing Mix:
- The product mix is closely interconnected with other elements of the marketing mix, including price, promotion, and distribution. Consistency among these elements is crucial for effective marketing activities.
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Overall Business Condition or Condition of Economy:
- Considering the broader economic context, both domestic and global conditions impact a company's product mix. Factors such as liberalization and globalization necessitate a holistic view of the world economy when designing a product mix.
In summary, a strategic approach to product mix management involves a careful consideration of these factors to ensure the overall success and sustainability of a business in a dynamic market environment.
