Newsletter Subscribe
Enter your email address below and subscribe to our newsletter
What is Harvest Strategy?
A harvest strategy is a business approach designed to maximize short-term cash flow from a product, business unit, or investment by reducing or eliminating new investment while continuing to extract remaining value. It is commonly used for mature, declining, or non-core products.
Definition
A harvest strategy is a profit-extraction approach where a company minimizes spending and investments to generate maximum cash flow from an aging or declining asset.
Key Takeaways
- Used when a product or unit no longer justifies further investment.
- Focuses on short-term profitability rather than long-term growth.
- Allows companies to reallocate resources to more promising opportunities.
Understanding Harvest Strategy
Harvest strategies are employed when a company decides that a product or business segment is no longer a strategic priority. Instead of investing to grow or maintain it, the company reduces budgets for marketing, operations, and development.
The goal is to keep the product generating revenue—with minimal investment—as long as it remains profitable. Over time, sales typically decline, but the reduced cost structure ensures positive cash flow.
Harvesting is common in industries with product life cycles, such as consumer goods, technology, and manufacturing.
Real-World Example
A software company may stop updating an outdated product but continue selling licenses and offering minimal customer support, allowing it to generate revenue while investing in newer technologies.
Importance in Business or Economics
Harvest strategies:
- Free up capital for high-growth initiatives.
- Extend the profitability of declining products.
- Help companies manage portfolios and exit non-core markets.
- Improve resource allocation efficiency.
Types or Variations
- Planned Harvest — Gradual decline managed over time.
- Rapid Harvest — Fast withdrawal of investment.
- Silent Harvest — Minimal public communication, continued monetization.
Related Terms
- Product Life Cycle (PLC)
- Divestment
- Cash Cow
Sources and Further Reading
- Investopedia: https://www.investopedia.com/terms/h/harvest-strategy.asp
- Harvard Business Review: https://hbr.org
- McKinsey Insights: https://www.mckinsey.com
Quick Reference
- Maximizes short-term profit from declining assets
- Reduces investment and focuses on cash flow
- Common in mature product markets
Frequently Asked Questions (FAQs)
When should a company use a harvest strategy?
When a product has low growth potential and does not warrant further investment.
Does harvesting always lead to product discontinuation?
Eventually, yes—most harvested products phase out over time.
Is a harvest strategy risky?
It can be if competitors remain aggressive or customers require ongoing investment.
