Discuss the advantages and disadvantages to AAB of having such a wide product portfolio?
A product portfolio consists of the different ranges of products that a business has to offer. AAB currently posses a wide product portfolio, where products are based on a range of high end, and low end products as well as varying from baby mattresses to clothing. There are obvious advantages and disadvantages to this, that AAB will need to consider before widening their product portfolio further.
AAB’s product portfolio consists of “hundreds of different products including maternity, baby clothes, pushchairs, car seat, nursery furniture and decorations, toys and feeding utensils.” One advantage is that this helps AAB to maximise sales and market share, for example if a customer wishes to purchase a product from the established business but perhaps do not require a mattress, AAB can generate profit elsewhere int he business for example through their toys and feeding utensils. Another way that AAB will be able to maximise their profits through having a wide product portfolio is that they are able to cater to different ranges of customers, for example by having both feeding utensils and baby clothes as well as push chairs and car seats, it means that the business will be able to cater for both new born babies as well as toddlers. This is advantageous as it means that AAB will inevitably be making sales at all aspects of the business- and ultimately help Javier and Elizabeth reach their 12 month strategic objective of returning to profitability.
Additionally, AAB’s wide product portfolio helps the business to cater to different segments of the market. For example by introducing AAB’s basic foam mattress range caters to the lower socio economic groups as well as the supreme mattress which helps cater for higher socio economic groups means that AAB are covering mass audiences in their target market. This is clearly an advantage as it means that AAB will be able to make sales from both customers that have a lower budget as well as the customers that require luxury products: this will further benefit AAB as it means they will be able to spread their exposure and influence on the public by establishing a good reputation and word of mouth by making products that appeal to a large range of buyers.
It could also be argued however that AAB’s wide product portfolio makes it easier for the business’ reputation to become tarnished by other products. For example, if a customer decides to purchase a mattress from the basic range and finds that it is not the quality they desire, it may mean that one product that AAB supplies builds an entire bad reputation on the whole product range offered at AAB and therefore prevents the customer from buying any more of AAB’s products due to the fear of having a similar experience. It could be argued that it would be more beneficial for AAB to have a smaller, tighter control of high quality products rather than a large range of average to poor quality products offered. Therefore, an obvious disadvantage means that it becomes easier for AAB to be impacted by bad word of mouth and a bad reputation of a few products.
Further to this, AAB will be able to become less vulnerable to adverse changes in one market segment. For example, if AAB find that they are experiencing a current economic recession in one of the many countries they supply to, it means that the impact will be reduced by having a wide product range. Additionally then, if AAB experience a boom, they will also be able to reap the benefits. It could be argued that one reason for AAB having a better stance over competitors after the recession is due to its ability to become versatile to ever-changing markets through products that appeal to more than one type of customer e.g. can be more affordable in times of economic recession.
However, one disadvantage of AAB’s wide product portfolio is that it hinders the ability of Javier and Elizabeth to expertise in one particular field. For example, if the couple solely based their business AAB around baby mattresses, it means that they will spend all their time investing in to that field, whereas by spreading their interest into a number of different fields, Javier and Elizabeth are prevented from gaining the knowledge and expertise they could have benefitted from if they specialised in only one field of the baby industry. This is a disadvantage as it means that they are less likely to be able to explore and create new innovative products through the deep exploration of one product as they have to spread their interests evenly throughout the business. Further to this, it could also mean that they are unable to offer expert advice to customers who want to know specific things due to having to provide knowledge for a wide range of products.
Lastly, it could be said that AAB’s wide product portfolio helps to spread risk. Inevitably, at different times, different products or AAB’s product range will become vulnerable to changes in demand. Therefore, by keeping a wide product range, if for example the demand for luxury and vibrant pushchairs decrease due to external factors, it means that AAB will still be able to make profit elsewhere in the business for example in the maternity wear for mothers or even the clothing and utensils for children. Therefore an advantage of having a wider product range means that AAB are able to disperse risk widely rather than having one vulnerable market.