Decision to exit a product is NPV-based as
well.
Mathematical models are used to assess the
collateral damage of removing a product. Such modeling is outsourced to big
consulting firms who have recognized proprietary models.
Many variables are incorporated in the
model, such as competitive positioning, relevance of (internal) substitutes,
bargaining power towards, etc.
As explained by our informant, the findings
should typically enable the company to answer the following questions:
·
How will my competitors’ market
share increase? Sometimes it is better to keep a slow mover so that the global
market share – across all products does not suffer.
·
Are there any barriers to entry
for competitor in this segment? That is, is my share of voice so big that there is little threat to be attacked on
this product? Sometimes it is good to keep a slow mover because there is, and
can be no competition.
