Application Of Marginal Contribution Analysis In Product Lifecycle Management

Nowadays, the dairy industry faced with increasingly complex business environment and the increasingly fierce market competition, in order to survive and develop, while creating value for customers, each enterprise also needs to realize the enterprise’s target. The competition among enterprises in the final analysis is the competition of products and services. The development of the enterprise is from product development, enterprise’s profit comes from the product profit, and how to layout the product strategy, the adjustment of product structure, we should not only to watch the performance of the product in the market and market share, but also to see whether the product makes money, whether the product has profit space, and then marginal contribution is required to compute accurately the product profitability, based on this demand, this essay makes in-depth research, so as to make the decision of product launching, improvement, elimination, etc.Mengniu divided product life cycle into introduction period, growing period, mature period and declining period, and set differentKPI to control. Mengniu’s initial analysis is mainly based on the product gross margin, net profit margin, and according to the performance of the market, how much the profit each product makes to decide the product marketing strategy (including the continued input costs, phasing out etc.) However, the product management proposals finance department made is mainly based on accounting basis, which is often in conflict with that made by the business sector, with the growing scale of enterprise, demand of a unified analysis system is more urgent which can reflect the product profitability, profit contribution, the requirement and direction of the product marginal contribution analysis is more clear. Under the instruction of contribution margin theory and the combination of company’s field situation, Mengniu classified cost nature reasonably, and set product marginal contribution card to further analysis, also provide guarantee from aspects of organization structure, roles&responsibilities, process control, operating rules, KPI design, mechanisms of accountability, etc.Through detailed analysis of marginal contribution in product life cycle management, Mengniu improves the accuracy of cost expense proportion and reasonableness of product profitability analysis; enhance the credibility of decision-making basis. Mengniu solves the conflict between finance team and business team regarding whether the specific product makes profit through the finance and business team analysis basis consistence, to avoid wrong decision. However, Mengniu Dairy should also strengthen in aspects such as management attention of this work, the coordination of each system, the related incentive mechanism, knowledge of marginal contribution theory of each business department, and also basic infrastructure construction.