Harvest Strategy

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What is a Harvest Strategy?

A Harvest Strategy is also known as an Asset Reduction Strategy or Cash Cow Strategy (BCG Matrix).

It is a means by which an organization seeks to limit or decrease its investment in a business by extracting as much cash out of its operation as possible. It steers middle course between maintenance and abandonment. Reinvestment in the business is minimal.

Typically, this strategy is employed in unattractive or declining markets, and where the business is not seen as a major component of a firm's portfolio.

In marketing, the term is used for a business tactic for either canceling or reducing marketing spending on a product, product line, or brand. For example when management has decided that it will cost too much to boost sales for the brand or product (line) using advertizing or similar.

The term harvest strategy can also refer to a tactic of investors such as venture capitalists or private equity investors. Also referred to as an exit strategy, investors seek to exit their investment after it became a success and will then use a harvest strategy to collect the profit from their investment in order to be able to reinvested the funds that are freed up into new ventures.

Typically investors aim for 2 to 5 years to recoup their investment.

Two common harvesting tactics for equity investors are selling the company to another company and having an Initial Public Offering (IPO) of company stock.

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Compare also: Cash Ratio  |  Exit Strategy  |  Turnaround Management

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