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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
  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 For additional Information Execute • Develop detailed plans and implement
  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 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?
  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 For additional Information developing a Low strategic portfolio Dog Cash plan Cow Bubble denotes High Low current market % of portfolio Relative Mkt. Share
  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 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
  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 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
  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 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.
  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 For additional Information Prob. Of success % Strategic direction (text) Project Horizon Financial Projections 2004 2005 Sales $ $ Cost $ $ Cash Flow $ $
  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 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%