Commodity policy is a set of measures, as well as strategies aimed at determining the goals of the business and their achievement. This is a pre-defined action plan for a company that manufactures or markets a certain type of product. The product policy includes the assortment policy of the enterprise and the use of product strategies. Product strategy is determined by the overall strategic course of the enterprise.
Assortment policy is the definition of a set of product groups that become the most preferable for the successful operation of the enterprise and ensure the economic efficiency of its activities, the formation of the range of products in accordance with market needs, the financial condition of the enterprise and its strategic goals.
In the formation of assortment products should:
- identify the relationship between new products that require modification and improvement, traditional products, as well as obsolete;
- establish the range of products and planned quantitative and qualitative indicators ;
- determine the number of models, as well as modifications of the same product;
- determine the composition of the life cycle of each product, as well as prospects for updating the range.
The assortment policy is formed to achieve long-term goals and is especially significant under tough competitive conditions that place high demands on the product in terms of both assortment and quality. Her questions are taken at the strategic level of the enterprise and takes into account its general strategic goals.
An assortment policy, its development and implementation is created subject to the following conditions:
• a clear understanding of the overall strategy of the enterprise in the market is necessary;
• A good knowledge of the market and the nature of the requirements of the target category of customers are necessary;
• A clear idea of the available resources and capabilities of the enterprise, both today and in the future, is needed.
The assortment policy should be justified on the basis of general principles providing for the simultaneous entry of the following product groups onto the market:
- basic - goods that bring the company the bulk of the profits;
- supporting - goods that bring the company less profit than the main ones, but are constantly entering the market and stabilizing revenue;
- strategic - goods from which the company plans to make significant profits in the future;
- tactical - goods designed to stimulate the sale of the main product group.
Assortment changes can be based on three approaches:
1. Vertical changes in the assortment. Such processes are part of the vertical diversification of the company's production activities and are aimed at expanding or narrowing the production of those components that were previously purchased from suppliers, as well as creating their own distribution network in order to promote products manufactured by this company.
2. Horizontal changes are one of the components of horizontal diversification. This is the name of assortment changes within the framework of an existing activity either in related directions or entering a new market in the framework of cooperation without transitions to adjacent levels.
3. Comprehensive changes. They are diversified both horizontally and vertically.
Expansion or narrowing of the range may be due to two reasons. Usually this is an expansion associated with the diversification process, or a narrowing caused by the need to integrate both horizontal and vertical.