The term harvest strategy refers to the planned discontinuation of new investments in a line of business or product so the maximum profits can be extracted from it. Harvest strategies are oftentimes used when a product is nearing the end of its lifecycle, or the usefulness of a service is nearly over.
As a product or line of business approaches the end of its useful life, companies will employ a harvest strategy. This occurs in mature businesses or products deemed unlikely to continue a growth trajectory, even with an infusion of additional capital. The objective of a harvest strategy is to maximize the profits that can be extracted from the product as its popularity winds down.
When executing against a harvest strategy a company has several options, including:
- Lowering or eliminating marketing / advertising expenses, and relying on brand loyalty to help generate new sales.
- Lowering or eliminating new capital expenditures, allowing existing equipment to run to failure.
- Lowering or eliminating operating expenses; spending money only when the payback on a new investment is extremely high.
The telecommunications landline business is a frequently cited example of a harvest strategy. As the availability of wireless signals expanded across the United States, it was no longer necessary to have a landline telephone. Telecommunication companies continue to support the technology, but as infrastructure is destroyed by storms, they are not rebuilding their wired network; instead, they are improving and expanding wireless coverage.