After being banished to the cupboard for years, instant oatmeal has staged a comeback with campaigns emphasizing health (for all) and fun (for kids) as oatmeal sales shot up in the late 1990s. The category turnaround began in January 1997 when the FDA permitted manufacturers to state that diets low in saturated fat and cholesterol that include soluble fiber from oatmeal may reduce the risk of heart disease. â€œQuaker Oatsâ€, which owns almost two-thirds of the category, capitalized on the opportunity to target kids by infusing fun with nutrition through new oatmeal products such as Sea adventures and Dinosaur egg.
If the company were choosing between harvesting and divesting, its strategies would be quite different. Harvesting calls for gradually reducing a product or businessâ€™s costs while trying to maintain sales. The first step is to cut R&D costs and plant and equipment investment. The company might also reduce product quality, sales force size, marginal services, and advertising expenditures. It would try to cut these costs without letting customers, competitors, and employees know what is happening. Harvesting is difficult to execute. Yet many mature products warrant this strategy. Harvesting can substantially increase the companyâ€™s current cash flow. Companies that successfully restage or rejuvenate a mature product often do so by adding value to the original product.
Let us take the case of — the experience of Pitney Bowes, the dominant producer of postage meters.
In 1996, critics, and even Pitney Bowes insiders, predicted that faxes would kill regular mail, on which Pitneyâ€™s business relies. Then they predicted that e-mail would kill faxes and that all these technological advances combined would kill Pitneyâ€™s profits. As it happens, the surge in direct mail and Internet-related bills has generated more mail, not less but the internet also enabled new companies such as e-stamps and stamps.com to enter Pitneyâ€™s territory by offering a way to down load stamps over the internet. Pitney recast itself as a messaging company — its slogan became â€œEngineering the flow of communicationâ€. It developed software products that let customers track incoming materials and outgoing products, convert bills and print files to fax or e-mail, and track when a document has been acted upon. Pitney also provides electronic billing services for e-commerce companies and even added an electronic-stamp business to compete with the stamp start-ups. Pitneyâ€™s view: The Internet is not the enemy; rather, it is a vehicle for becoming a broad based messaging company.
When a company decides to drop a product, it faces further decisions. If the product has strong distribution and residual goodwill, the company can probably sell it to another firm. If the company canâ€™t find buyers, it must decide whether to liquidate the brand quickly or slowly. It must also decide on how much inventory and service to maintain for past customers.