Extracting, or harvesting, cash from a business by limiting the amount of new money that is committed. For example, a cereal manufacturer may limit advertising for a particular brand that appears to offer little opportunity for sales growth. Rather, the firm harvests cash from the brand, termed a “cash cow," in order to have funds available for more promising brands.Case Study
Companies typically choose a harvest strategy for mature products that remain profitable but offer little potential for growth. Rather than pour additional funds into research and marketing, the firms choose to continue selling these products and harvest the cash they generate for supplementing the budgets of more promising products. A harvest strategy was chosen by Kodak for what had historically been its most profitable product, film. As businesses and consumers moved from film to digital photography, Kodak's major products faced a bleak future with deteriorating revenues. To meet this challenge, Kodak management chose to make a major push into digital photography. The firm announced that it would no longer sell film-based cameras in the United States, Western Europe, and Canada. Later the company said it would stop promoting film, although this former flagship product would continue to be sold. Reflecting Kodak's new direction, research and development spending by the firm's Film & Photofinishing Systems Group declined from $155 million in 2004 to $40 million in 2006. During the same period, R&D spending by the Consumer Digital Imaging Group increased from $164 million to $171 million.