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Portfolio Discussion

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Portfolio building and analysis

Portfolio Discussion

  1. 1. Portfolio - a collection of products, services, or brands that are offered for sale to a customer in order to achieve diversification and balance. Framework I use for Product Portfolio analysis For additional Information Contact paul.bosetti@gmail.com
  2. 2. Framing the Portfolio Strategy Build on the current strategy and dig deeper “Desire for growth while managing Risk” Build Current State • Detailed business analysis & Competitive landscape analysis Define Future State To Ensure Long Range Profits & Cash Flow • Correct product mix to match company strategy • Possible growth platforms to launch new offerings. Determine how the financial and corporate strategy will link in with the Portfolio Strategy Contact paul.bosetti@gmail.com For additional Information Execute • Develop detailed plans and implement Paul.bosetti@gmail.com
  3. 3. Current State Review Current State, possible analysis steps in defining Portfolio Strategy* • Map revenues, customers, and gross margin to market segments • Conduct detailed ABC analysis of revenue generation activities • Determine cost to serve models “prune” unprofitable customers or move them into a different line segment • Interview key customers and management personnel • Assessment of Industry attractiveness Contact paul.bosetti@gmail.com For additional Information • Economic analysis • Barriers to entry • Competitors *Portfolio models are narrow in nature. They may obscure the most essential strategic issue in building a portfolio…what are the drivers for creating and enhancing interrelationships? Paul.bosetti@gmail.com
  4. 4. BCG Growth Share Matrix BCG matrix is good for picturing aggregate composition. Plot current market share within target segments. This is a simple matrix which is High useful in laying Star out the current Question Industry Growth state, but a more Mark robust analysis will aid in Contact paul.bosetti@gmail.com For additional Information developing a Low strategic portfolio Dog Cash plan Cow Bubble denotes High Low current market % of portfolio Relative Mkt. Share Paul.bosetti@gmail.com
  5. 5. Business Assessment Array Analysis that uncovers more information about Market opportunities & competitive position through composite dimensions Build a hierarchical High A B C analysis at the Attractiveness product offering Industry within industry B C D Med segments Industry Business Contact paul.bosetti@gmail.com For additional Information C D D Low Attractiveness Strength Market Position Market Size Market share High Med Low Market Growth Share growth Profitability Business Strength Share compared with Cyclicality leading competitor Ability to Recover A-Investment/Growth From a Recession Competitive Strength B-Selective Growth Quality leadership C-Selectivity Technology D-Evaluate Relative profitability Paul.bosetti@gmail.com
  6. 6. Review ABC Segmentation/Strategy Portfolio review may lead to analysis that uncovers extreme concentration of sales in a few customers 100% 100% 80% 80% Cumulative Cumulative % of % of 50% 50% Sales/Profits Sales/Profits 0% 0% 20% 50% 100% 35% 50% 100% Percentage of Routes/Industry Percentage of Customers/Segments Contact paul.bosetti@gmail.com For additional Information Action Plan Customer/Product Evaluation Cutomer/ Industry/ 2003 2003 Strategicaly Action Plan Route Revenue Profits Important Retain Customer A A 100 20 Yes Grow Segment B B 25 5 No Enter market X C 75 15 Yes Enter new businss D 20 2 Yes Paul.bosetti@gmail.com
  7. 7. Future State Future State: Once the industry trends, competitive pressure, competitive advantages, and risk tolerance is defined then we can answer: • Should we be in these business segments*? • Should we add a new product? • How can we win and hold a substantial share of the market? • How should we grow our presence in other segments to minimize risk and maximize our profits? Contact paul.bosetti@gmail.com For additional Information *Segmentation should be limited to grouping those buyers who share strategically relevant situational or behavioral characteristics. This will lead to effective cost to serve models. Paul.bosetti@gmail.com
  8. 8. Defining the value of new ventures Need to follow a systematic approach in defining how to build the business case and leap into new business horizons from our core competencies Develop Cost Sales ($) Dollars Key Performance Measures Cum. EBITA Gross Margin % NPV @ Disc Rate $ # years break even # Contact paul.bosetti@gmail.com For additional Information Prob. Of success % Strategic direction (text) Project Horizon Financial Projections 2004 2005 Sales $ $ Cost $ $ Cash Flow $ $ Paul.bosetti@gmail.com
  9. 9. Additional thoughts To “predict” future growth we may also want to measure and follow actual and estimated GDP and IPI Real Gross Domestic Product (GDP) • Measures the value of goods and services produced in US excluding inflation Industrial Production Index (IPI) • Measures the physical units & inputs into the US production process Other correlation possibilities • Durable good orders (indicate possibly inventory restocking) Contact paul.bosetti@gmail.com For additional Information • Corp Profits • Consumer confidence (Increase income, Increase job mkt.) 2003nd 1st Half 2 Half 2003 Results 2.4% 6.1% GDP IPI (1.1%) 5.1% Paul.bosetti@gmail.com

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