Product Portfolio Management – Managing a Mix of Customized and Standardized Products

Abstract: ABB Machines in Västerås, Sweden develop, sell, and manufacture generators and large electric motors worldwide. During the past years new competitors have emerged from a lower output range and some customers have reduced their demands in order to reduce the generator costs. In order to meet these changes in the market ABB Machines has developed a new pre-engineered standardized generator that allows for easier purchase and more efficient production. This new generator, here referred to as Basic, will have less flexibility compared to the current range of generators but provide the same robustness and quality. ABB Machines needs help with integrating the new product range into its existing product portfolio. There are a number of challenges with regards to marketing the new product both internally and externally that need to be covered by this thesis. The purpose of this thesis is to answer the question; How should the new product rage, Basic, be integrated into ABB Machines existing product portfolio? The aim is to provide useful recommendations to ABB Machines of how, in the most successful way, manage this product integration. After some background information about ABB Machines in Västerås was gathered through interviews a theoretical framework was created from various books, articles, and journals related in different ways to the subject. The theoretical framework was used as a foundation for several case studies conducted at different companies. The companies were selected due to their successful product introduction and similarity to ABB Machines’ situation either based on product, marked position, branch or other. The case studies were based on interviews and the companies were analyzed with regards to their processes and their ability to overcome the obstacles that ABB Machines is facing. 5 Delimitations: Conclusion: The case studies together with the theoretical framework were used to determine the preferred company behavior and after an analysis of ABB Machines in Västerås they were used to make recommendations of how to act in the situation that ABB Machines in Västerås was in at the time of writing. A few potential issues have been left out of this thesis for various reasons. The risk that the new product would cannibalize on the existing products’ volumes is one of them. Another issue, strongly related to the above, is to what extent the standardized generator should be sold in terms of how large part of the total sales should consist of Basic orders in the long run. This is a question for ABB Top Management and will also be left out of this thesis. Lastly, how to select new suppliers related to the new product and ensure their appropriateness is an issue of importance, but will not be discussed in this thesis. In order to manage both standardized and customized products the internal processes need to be separated and clearly documented. If the same processes are kept for both products ABB Machines risks that the standardized products will be too time consuming and therefore too costly. Without separated processes it will also be difficult to maintain the standardized products’ lesser flexibility and stay within the borders of the limited options, which is essential for product success. When it comes to external marketing the limitations of the standardized products must be clearly communicated to the customers and what is included in a standardized order must be stated in an obvious way in the sales process to prevent discussions and confusions later in the project. If the above is managed properly and no confusion about the differences between the standardized and the customized products arises the price difference between the two can be explained through the advantages of standardization, which according to the studied companies should be well known among companies within ABB Machines industry.