Problems Involved in Product Elimination Process
The product elimination decision is also an important decision relating to the product line. It is not advisable to continue the production of bad, weak and uneconomic products in the long-run as it yields only losses. The resources of the firm are underutilized or wasted through continuing the production of such goods. The goodwill of the firm is also shattered.
So the management should review their products from time to time from this angle also. It is also be possible that a particular product may be in the last stage of its life-cycle. So, it must be discontinued now.
The following analysis is important in this context:
i) Whether a substitute of the product has been developed or can be developed.
(ii) Whether the ideal resources can be profitably used in the production of other profitable goods.
(iii) Whether the loss zone has started in the products life- cycle of the product.
(iv) Whether the demand and sale dour other product will be affected in any manner if the production of that product is discontinued.
If the answer all to such questions is to ‘yes‘ then, a product elimination decision should be made. It will provide the management an opportunity to make their product-mix an optimal product-mix.