Harvest Strategy

What Is a Harvest Strategy?

A harvest strategy is a marketing and business strategy that includes a reduction or a termination of investments in a product, product line, or line of business so the elements included can procure — or, harvest — the maximum profits. A harvest strategy is regularly employed close to the furthest limit of a product's life cycle when it is resolved that further investment will never again support product revenue.

Grasping Harvest Strategies

Products have life cycles, and when the thing approaches the finish of its life cycle, it typically won't benefit from extra investments and marketing efforts. This product stage is called the cash cow stage, and it is the point at which the asset is paid off and requires no further investment. In this manner, utilizing a harvest strategy will permit companies to harvest the maximum benefits or profits before the thing arrives at its decline stage. Companies frequently utilize the proceeds from the ending thing to fund the development and distribution of new products. Funds likewise may go toward advancing existing products with high growth potential.

For instance, a soda pop company might end investments in its laid out carbonated product to redistribute funds to its new line of energy drinks. Companies have several harvest strategy options. Frequently they will depend on brand loyalty to drive sales, subsequently lessening or taking out marketing expenses for new products. During harvest, the company can limit or kill [capital expenses](/capitalexpenditure, for example, the purchase of new gear expected to support the ending thing. Likewise, they can limit spending on operations.

A harvest strategy might include the steady elimination of a product or product line when innovative advances render the product or line obsolete. For instance, companies selling sound systems slowly disposed of sales of record turntables for CD players as compact circle sales soared and record sales declined. Additionally, when product sales reliably fall below the target level of sales, companies may bit by bit dispose of the connected products from their portfolios.

Computers, cellphones, and other hardware products are common objects of harvest strategies as they immediately become obsolete and profits are put into more up to date contraptions.

Special Considerations

Harvest strategy likewise alludes to a business plan for [investors](/financial backer, for example, venture capitalists or private equity investors. This method is commonly alluded to as an exit strategy, as investors look to exit the investment after its prosperity. Investors will utilize a harvest strategy to collect the profit from their investment so that funds can be reinvested into new ventures. Most investors estimate that it will require somewhere in the range of three and five years to recover their investment. Two common harvest strategies for equity investors are to sell the company to another company or to make a initial public offering (IPO) of company stock.

Highlights

• A harvest strategy includes lessening spending on a laid out product to expand profits.
• Strategies for venture capitalists to exit fruitful investments additionally are alluded to as harvest strategies.
• Regularly, harvest strategies are involved on obsolete products as profits are reinvested in more current models or fresher advances.