PREPARED BY ISHVEEN KAUR

WHAT IS BUSINESS PORTFOLIO ANALYSIS? The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities.

WHAT IS BUSINESS PORTFOLIO ANALYSIS?

The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities.

Business portfolio analysis as an organizational strategy formulation technique is based on the philosophy that organizations should develop strategy much as they handle investment portfolios. Just as sound financial investments should be supported and unsound ones discarded, sound organizational activities should be emphasized and unsound ones deemphasized.

Business portfolio analysis as an organizational strategy formulation technique is based on the philosophy that organizations should develop strategy much as they handle investment portfolios. Just as sound financial investments should be supported and unsound ones discarded, sound organizational activities should be emphasized and unsound ones deemphasized.

BCG Growth-Share Matrix The GE Multifactor Portfolio Matrix Matsushita Strategy Matrix Road-mapping The GE Multifactor Portfolio Matrix was deliberately designed by General Electric Company (GE) and McKinsey and Company to be more complete that the BCG Growth-Share Matrix.

BCG Growth-Share Matrix

The GE Multifactor Portfolio Matrix

Matsushita Strategy Matrix

Road-mapping

The GE Multifactor Portfolio Matrix was deliberately designed by General Electric Company (GE) and McKinsey and Company to be more complete that the BCG Growth-Share Matrix.

Promotes competitive analysis at the level of SBU’s. Better utilization of financial resources It reduces risk, increase concentration, identification of strategies at corporate level.

Promotes competitive analysis at the level of SBU’s.

Better utilization of financial resources

It reduces risk, increase concentration, identification of strategies at corporate level.

The short term financial condition and health of the company must be determined to assess whether it is a feasible entity or likely to go bankrupt The relative competitive position of the business must be ascertained because even if the business is not about to become bankrupt, liquidation of the business may be one of the strategic choices. It is then necessary to determine the position of evolution of the market that the business competes in. This will help decide whether the preferred strategy is share increasing, growth or profit. A plot is then made of the business’s basic strategic position.

The short term financial condition and health of the company must be determined to assess whether it is a feasible entity or likely to go bankrupt

The relative competitive position of the business must be ascertained because even if the business is not about to become bankrupt, liquidation of the business may be one of the strategic choices.

It is then necessary to determine the position of evolution of the market that the business competes in. This will help decide whether the preferred strategy is share increasing, growth or profit.

A plot is then made of the business’s basic strategic position.

Liquidity trends Profitability trends Turnover trends Ratio analyses should be calculated Short and long term cash flows should be examined Corporate and business financial models can also be of assistance

Liquidity trends

Profitability trends

Turnover trends

Ratio analyses should be calculated

Short and long term cash flows should be examined

Corporate and business financial models can also be of assistance

To develop a better measure of the long-term growth potential and profit potential of the organizations businesses. Method is more comprehensive Market Share is an indicator of profit potential but other factors also influence this measurement Success factors of the organization's businesses vary from business to business

To develop a better measure of the long-term growth potential and profit potential of the organizations businesses.

Method is more comprehensive

Market Share is an indicator of profit potential but other factors also influence this measurement

Success factors of the organization's businesses vary from business to business

Market share SBU growth rate Breadth of product line Sales distribution effectiveness Capacity and productivity Experience curve effects Raw materials cost Value added Relative product quality and ETC……. Examples of success factors – Hofer-Schendel (1978)

Market share

SBU growth rate

Breadth of product line

Sales distribution effectiveness

Capacity and productivity

Experience curve effects

Raw materials cost

Value added

Relative product quality and ETC…….

Charles W. Hofer and Dan Schendel, they described seven stages of the life cycle, each with certain characteristics by which the position of the market can be identified.

Charles W. Hofer and Dan Schendel, they described seven stages of the life cycle, each with certain characteristics by which the position of the market can be identified.

1. A major blunder by the industry leader 2. A major investment program by a well positioned follower 3. Through the acquisition and effective integration of another firm within the industry 4. Through a sustained effort to produce small, consistent incremental advantages over a long period of time.

1. A major blunder by the industry leader

2. A major investment program by a well positioned follower

3. Through the acquisition and effective integration of another firm within the industry

4. Through a sustained effort to produce small, consistent incremental advantages over a long period of time.

“ He took series of research studies showing that the stage of the life cycle of the product represents a factor that influences to greater or smaller extent the success of a strategy”

“ He took series of research studies showing that the stage of the life cycle of the product represents a factor that influences to greater or smaller extent the success of a strategy”

According to Hofer and Schendel , "The Principal difficulty with GE Business Screen is that it does not depict as affectively at it might the positions of new businesses that are just starting to grow in new industries. In such instances, it may be preferable to use a fifteen-cell matrix in which businesses are plotted in terms of their competitive position and their stage of product/market evolution". Thus, Hofer developed the Product/Market Evolution Portfolio Matrix, or Life Cycle Matrix .

According to Hofer and Schendel , "The Principal difficulty with GE Business Screen is that it does not depict as affectively at it might the positions of new businesses that are just starting to grow in new industries.

In such instances, it may be preferable to use a fifteen-cell matrix in which businesses are plotted in terms of their competitive position and their stage of product/market evolution". Thus, Hofer developed the Product/Market Evolution Portfolio Matrix, or Life Cycle Matrix .

Dimensions STAGE OF INDUSTRY EVOLUTION Early Development Rapid Growth/Takeoff Shake-Out Maturity/Saturation Decline/Stagnation COMPETITIVE POSITION

Dimensions

STAGE OF INDUSTRY EVOLUTION

Early Development

Rapid Growth/Takeoff

Shake-Out

Maturity/Saturation

Decline/Stagnation

COMPETITIVE POSITION

The business unit competitive position Strong Average Weak The Life-Cycle Portfolio Matrix Development Growth Competitive shakeout Maturity Decline Saturation Th e Industry’s stage in the evolutionary life cycle

Advantages Used to identify developing winners Illustrates how businesses are distributed across the stages of industry evolution

Advantages

Used to identify developing winners

Illustrates how businesses are distributed across the stages of industry evolution

THANK YOU

THANK YOU