What is Harvest Strategy?
921 reads · Last updated: December 5, 2024
A harvest strategy is a marketing and business strategy that involves a reduction or a termination of investments in a product, product line, or line of business so that the entities involved can reap—or, harvest—the maximum profits. A harvest strategy is typically employed toward the end of a product's life cycle when it is determined that further investment will no longer boost product revenue.
Definition
A harvest strategy is a marketing and business strategy that involves reducing or stopping investment in a product, product line, or business line to maximize profits. It is typically employed in the later stages of a product's lifecycle when further investment is unlikely to increase revenue.
Origin
The concept of a harvest strategy originated in the mid-20th century as market competition intensified and the product lifecycle theory developed. Companies began to recognize the importance of adjusting investment strategies during the maturity or decline phases of a product to maximize profits in its final stages.
Categories and Features
Harvest strategies can be categorized into full harvest and partial harvest. A full harvest means ceasing all investments to maximize short-term cash flow, while a partial harvest might involve limited investments to maintain market share. Features include reducing marketing expenses, lowering production costs, and optimizing inventory management. The advantage is quick capital recovery, but the disadvantage is the potential rapid decline in market share.
Case Studies
A classic example is Kodak's harvest strategy for its film business. As digital photography emerged, Kodak gradually reduced investment in traditional film and shifted focus to digital products. Another example is Nokia's strategy adjustment in the feature phone market; as smartphones became prevalent, Nokia reduced investment in traditional phones, which eventually led to a decline in market share.
Common Issues
Common issues investors face when applying a harvest strategy include accurately determining the stage of the product lifecycle and maintaining customer satisfaction while reducing investment. A common misconception is that a harvest strategy is always the best choice, overlooking changes in market conditions.
