Portfolio analysis

Portfolio analyzes are an important tool in strategic planning. The beginnings of portfolio analysis come from the area of finance with the compilation of a balanced "securities portfolio" from the point of view of risk and return. This approach was transferred to individual business areas of a company in order to characterize strategic alternatives of business units and put them together in a target-oriented manner and is an essential tool for developing a strategy. The portfolio analysis serves ...

... to identify, diagnose and forecast company-related market weaknesses and strengths as well as environmental risks,

... the design of alternative strategies for target-oriented handling of opportunities and risks as well as for exploiting market power as well

... the evaluation and selection of individual procurement strategies and strategy bundles. In the portfolio analysis (usually two-dimensional) assessment matrices are used, which represent a relationship between different sizes.
On one axis, a company-influenceable (company-related) and a non-influenceable (environment-related) variable is usually plotted as a key factor. Based on the representation of the current situation, the expected future developments are also shown schematically. A separate portfolio can be created for each scenario of future developments and interpreted with regard to the direction of future activities. With the help of portfolios, strategies for action can be derived for individual business units or for the entire company.

The best-known portfolio representation is the market share / market growth matrix, which was first disseminated by the Boston Consulting Group. The relative market share is shown on the abscissa (x-axis) and the market growth is shown on the ordinate. The following matrix fields can be distinguished by the classification into high and low:

Young products have (initially) a small market share, but promise high growth. Investments in young products mean that high returns can be expected in the long term.

Star products indicate high growth and a leading market position. However, they use a large part of their income themselves to maintain or even improve their position in a growing market.

Cash products have a strong market position and generate high income due to their low financial requirements.

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