BY MD AZIZUR RAHMAN

1. PORTFOLIO MANAGEMENT
MD AZIZUR RAHMAN
PONDICHERRY UNIVERSITY

2.  Portfolio management is a dynamic decision process, whereby a
business’s list of active new product (and development) projects is
constantly up-dated and revised. In this process, new projects are
evaluated, selected and prioritized; existing projects may be
accelerated, killed or de-prioritized; and resources are allocated
and re-allocated to active projects. The portfolio decision process
is characterized by uncertain and changing information, dynamic
opportunities, multiple goals and strategic considerations,
interdependence among projects, and multiple decision-makers
and locations. The portfolio decision process encompasses or
overlaps a number of decision-making processes within the
business, including periodic reviews of the total portfolio of all
projects (looking at all projects holistically, and against each
other), making Go/Kill decisions on individual projects on an on-
going basis, and developing a new product strategy for the
business, complete with strategic resource allocation decisions.

3. WHY DO WE NEED PORTFOLIO MANAGEMENT?
 Financial
 Maintaining competition-sales and market
shares
 Effectively allocation of scarce resource
 Project selection and business strategy:
support the strategy
 Achieves focus- Not doing to many
project
 Achieve balance
 Better communication priorities within
the organisation, both vertically and
horizontally

4. FOUR GOALS IN PORTFOLIO MANAGEMENT
 Value maximization
 Balance
 Strategic Direction
 Right number project

5. BCG MATRIX (BOSTON CONSULTING GROUP)
Bruce Henderson of the Boston consulting group in the early
1970's.

6. QUESTION MARKS
 are low market share businesses in high-growth
markets
 poor competitive position in a growing industry
 products that grow rapidly and as a result consume
large amounts of cash, but because they have low
market shares they don’t generate much cash. The
result is a large net cash consumption. A question
mark has the potential to gain market share and
become a star, and eventually a cash cow when the
market growth slows. If it doesn’t become a market
leader it will become a dog when market growth
declines. Question marks need to be analysed
carefully to determine if they are worth the investment
required to grow market share.

7. STARS
 are high market share businesses in high-
growth markets. They produce large profits
through substantial penetration of expanding
markets.
 The preferred strategy for stars is growth, and
further resource investments in them are
recommended.
 Stars are defined by having high market
share in a growing market.
 Leaders in the business but still need a lot of
support for promotion a placement

8. CASH COWS
 high market share businesses in low-growth
markets. They produce large profits and a
strong cash flow. Because the markets offer
little growth opportunity, the preferred
strategy is stability or modest growth. The
choice of terms is very descriptive; “cows”
should be “milked” to generate cash that can
be used to support needed investments in
stars and question marks

9. DOGS
 low market share businesses in low-growth
markets. They do not produce much profit,
and
 they show little potential for future
improvement. The preferred strategy for dogs
 is retrenchment by divestiture

10. PROBLEMS WITH THE BCG MATRIX
MODEL?
 The first problem can be how do we define market and
how we get data about market share?
 A high market share does not necessarily lead to
profitability at all times
 The model employs only two dimensions – market
share and product or service growth rate
 Low share or niche businesses can be profitable too
(some Dogs can be more profitable than cash Cows)
 The model does not reflect growth rates of the overall
market
 The model neglects the effects of synergy between
business units
 Market growth is not the only indicator for
attractiveness of a market