Factors influencing changes in product mix
1. Change in market demand: the change in the demand of a product (due to change in habits, fashion, purchasing power, income, attitudes and preferences of consumers) affects the decision of product mix.
2. Cost of production: if the company can develop a new product with the help of the same labour force, plant and machinery and techniques, it can decide to start the production of that product at lower cost.
3. Quantity of production: if the production of new product is considered to be at a large scale and the company can add one more item to its product line just to get the economics of large scale production. Keeping in view its production capacity and other factors.
4. Advertising and distribution factors: Advertising and distribution factors may be the one of the reason for the changes in production mix. If the advertising and distribution factors organization are the same, the company may take the decision to add one more item to its product line.
5. Use of residuals: if residual can be used gainfully, the company can develop it's by products into the main products. For example, a sugar mill can profitably develop the production of paper card board or wine from biogases.
6. Change in company desire: keeping in mind the objectives of the firm, maintaining or increasing the profitability of the concern, the firm may eliminate some of its unprofitable processes or may start a new more profitable product. In this way, the firm tries to make its product mix an ideal one.
7. Competitions actions and reactions: the decision of adding or eliminating the product may be the reaction of competitor's actions. If company thinks that it can meet the competition well by making necessary changes in the size, colour, packing or price, it can make such changes.
8. Change in purchasing power or behaviour of the customers: if the numbers of customers are increased with the increase in their purchasing power or with the change in their buying habits, fashion, etc. the company may think of adding one or more product keeping mass production or increase in profitability in the mind.
9. Full utilization of marketing capacity: if the company is not getting desired results from the market, it can decide to stop the production of such a product and divert its resources to produce a new product or improve the existing product, according to the needs of the consumers.
10. Financial resources: finance is the life blood of the firm. Availability of the finance may necessarily some changes in the product of the company. If the company is short of finance or if the product is continuously going into loss the company may decide to drop such production similarly, if the company has sufficient funds, it may improve its products.