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Medium Profitability Product Portfolio Management

Omega Naval Systems

#Aero & Defense #Aerospace & Defense
ProHub Comment

This is a classic product portfolio optimization case focusing on profitability drivers and the relationship between fixed costs, volume, and product lifecycle economics. The case rewards candidates who can diagnose that Product 1 has significant untapped potential through economies of scale, while Product 3 is trapped in a cost structure with no improvement opportunity due to outsourcing constraints and limited supplier leverage.

Estimated Time 15 minutes
Difficulty Medium
Source Darden
50 / 100
Omega is an aerospace defense contractor with three naval radar systems in its product lineup. These systems are equipped on naval destroyers and aircraft carriers. They have three radar systems in their product lineup, Products 1, 2 and 3. 1 and 3 are substitutes for one another. The company has experienced declining profits in recent years and has brought us in to advise how to turnaround their financials.

Clarifying Information

  1. Only sell to US Navy with no intention of expanding to other branches.
  2. Omega makes money on the sale of the radar system, no ongoing service contracts. One time sale.
  3. No new products are expected to be developed or launched.
  4. No target improvement goal, just better than what it currently is.
  5. No historic profitability figures.
  6. All options on the table regarding the 3 product lines.
  7. Expect 100% conversion of customers from products 1 to 3 or 3 to 1 if either is shut down.