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The complete guide to strategy portfolio management

discuss strategic planning business portfolio analysis

An organization’s portfolio can be filled with any type of investment, project, or initiative. It’s essentially a collection of all the “stuff” a team has to its name. And if you’ve got a lot of stuff to keep track of, it’s easy to lose sight of the bigger picture and let a few things slide.

Strategy portfolio management is a way to keep things from sliding. Not familiar with the concept? Lucky you, because strategy portfolio management is kind of our thing — and we’d love to walk you through it.

This article will explain what strategy portfolio management is, why it’s important, how to develop a strategic portfolio management style, and how monday PMO work management software can help you get the job done quicker and more efficiently.

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What is strategy portfolio management?

Strategy portfolio management — or strategic portfolio management — is the process an organization uses to decide how it should focus its available resources within a portfolio to meet its strategic objectives.

Strategic portfolio management is all about making difficult decisions around which projects or initiatives should be pursued, which should be abandoned, and where resources can be unlocked or freed up to spend on programs or investments that better align with a company’s strategic goals.

But before we go any further into this, it’s worth taking a step back and talking about what we mean by “portfolio.” In its most simple form, a portfolio is a group of programs, projects, or initiatives that a company takes on to reach its goals.

Organizations will often use portfolios to group together specific parts of a business, and then use those groupings to shape the operations and direction the business ultimately takes.

You’ll often hear about portfolios in the context of finance. Financial portfolios are composed of assets like stocks, bonds, or mutual funds. Investors use portfolios to make gains and achieve financial goals — but it works the exact same way in project management.

Strategic portfolio management is important for any project manager or portfolio manager because it creates a strong link between a team’s strategy and its operations.

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If you think about it, portfolio management is all about choosing the right things to do. Project management is all about doing things the right way.

Strategic portfolio management combines the 2 so that an organization can always rest assured that it’s getting the right things done…right. Right? Right.

In the world of IT and systems management, strategic portfolio management is useful because it uses organizational data on projects within a portfolio, and then delivers focused business intelligence reports to stakeholders that spell out exactly how each project is helping contribute toward the company’s wider goals.

What are the benefits of strategy portfolio management?

Still with us? Good, because strategic portfolio management goes hand-in-hand with some really huge benefits. First and foremost, strategic portfolio management helps you refocus your operations by always keeping sight of a bigger picture.

One of the biggest mistakes a company will make is losing track of its long-term strategy because everybody spends too much time thinking about short-term objectives and emerging problems. We all get distracted at times, and a company is no different.

But by deploying strategic portfolio management, you’ll be able to ensure that all of the stuff you’re working on is always aligned with your strategic goals. That means regular analysis and portfolio review to check up on portfolio items to keep everybody on the same page.

Pyramid showing different between strategic and conventional portfolio management

( Image Source )

Strategic portfolio management also comes with the benefit of added efficiencies. The process itself is all about selecting projects that will help your organization achieve its goals.

By deploying good portfolio management with good project management, the cycle enables you to pick projects you know you’re going to ace. The result: your business will continue powering forward, bagging success after success.

Have we piqued your interest yet? This is just the tip of the iceberg. Check out our guide on why creating a strategic plan is worth your time .

What is the strategy portfolio management process?

Strategic portfolio management is going to mean different things to different organizations. But generally speaking, the process is always going to include 4 basic steps:

Illustration of the 4 steps in the strategy portfolio management process

So, let’s break those steps down for you really quick.

1. Inventory

Before you start deploying resources and canceling projects, you’ve got to wrap your head around what it is you’re trying to achieve.

First, you need to identify your organization’s strategic objectives. Take a look at all the project and company data, budgets, resource data, and priorities you can to get a clear picture of what you’re working with and what you should be working with.

Then, categorize your projects and create a gating process that you can use to split your projects up into manageable tasks. Finally, you’ve got to look at each task and project to ensure they’re all contributing toward your overall strategic goals.

After you’ve taken stock of your situation, it’s time to establish metrics for how you’re going to measure the success of portfolio items. Look at your project schedule, project budget, and resource data.

Next, organize each area by business unit and objective before ranking each portfolio item in terms of priority. Then, finalize the gating process to make sure every step within your projects makes sense as they relate to your broader strategic objectives.

The alignment phase is all about making sure your portfolio is strategically balanced.

Translation: this is the step where you look at where your resources are being used, emerging risks that are going to mess things up on your roadmap, and eliminate any redundancies cropping up.

Remember: your goal here is to make sure that every portfolio item on the roster is working in harmony with the other items to help you see that big picture.

Your final step in the strategic portfolio management process is management. This step is all about keeping a close eye on your portfolio and making changes wherever and whenever they’re required.

As part of the management stage, you may have to delay or cancel projects, redeploy resources, revise budgets, or launch portfolio changes if you’ve strayed from your strategic objectives.

Unfortunately for portfolio managers, this is a never-ending task. As long as the portfolio exists, it’s always going to need to be managed — especially if you’ve opted for a strategic management style.

Want to learn more about strategic portfolio management and how it can be applied to projects? We’ve got you covered.

How can you use monday.com for strategy portfolio management?

We’ve talked about what strategic portfolio management is and the steps involved.

But talking about the theory behind it and actually doing it are 2 very different things — and to be honest, that’s part of the reason a lot of people miss out on the benefits of strategic portfolio management.

They just can’t wrap their heads around how it’s done in practice. Luckily for you, monday.com does most of the work for you.

monday.com’s Portfolio Management template is ideal for both project portfolio management (PPM) as well as traditional investment management.

If you want to use the template to keep track of your team’s finances, it’ll show you the total amounts you’ve got actively invested in firms, as well as past portfolio positions that aren’t part of your investment strategy anymore.

Screenshot of monday.com's Portfolio management template

Handy features include:

  • Dozens of app integrations so you can onboard all your favorite tools and data with minimal fuss.
  • 8+ different views — including Gantt chart and Kanban — so that you can visualize your portfolio just the way you want.
  • Quick start-up so you can import portfolio information automatically from a spreadsheet.
  • Loads of automation recipes to streamline your strategic management workflow.
  • Flexible interaction that enables different team members to display the portfolio data that matters to their task or department.

There’s way more stuff to brag about, but we’ll let you discover all of that for yourself.

The point is, if you choose monday.com, you’ll be getting a strategic portfolio management platform that will enable you to keep track of all your portfolio items, see how they align to your strategic objectives, and shift stuff around to make sure everything is helping you achieve your business dreams.

Ready to level up?

If you’ve got a big portfolio to keep track of and ambitious team goals, you should really think about adopting a strategic portfolio management style.

It’s all about weighing the risk and reward of each task and decision to make sure your projects are always balanced. More important still, strategic portfolio management ensures that everything in your portfolio is contributing toward helping you to achieve your wider goals.

But constantly assessing every task or project and cross-referencing it against a set of strategic goals can be exhausting. That’s where monday.com steps in. With custom solutions like our Portfolio Management template, you’ll be able to get short, sharp snapshots of all your positions and how they stack up against your bigger picture.

Oh, and did we mention the best part? You can try monday.com 100% free for 14 days.

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Strategic portfolio analysis involves identification and evaluation of all products or service groups offered by company on the market (so called product mix ) and preparing specific strategies for every group according to its relative market share and actual or projected sales growth rate. It can be also used to make strategic decision about strategic business units .

Portfolio analysis in strategic management allows to answer key questions how to shape the present and future business portfolio (of product or services) in order to reduce the risk of functioning in a changing environment , and increase the effects of the implemented strategy .

discuss strategic planning business portfolio analysis

  • 1 Methods of portfolio analysis used in strategic analysis
  • 2 Example of Strategic portfolio analysis
  • 3 When to use Strategic portfolio analysis
  • 4 Steps of Strategic portfolio analysis
  • 5 Advantages of Strategic portfolio analysis
  • 6 Limitations of Strategic portfolio analysis
  • 7 Other approaches related to Strategic portfolio analysis
  • 8 References

Methods of portfolio analysis used in strategic analysis

  • Technological portfolio
  • Hofer matrix
  • McKinsey matrix

Example of Strategic portfolio analysis

To illustrate the process of strategic portfolio analysis, consider a company that wants to improve its customer service. They have identified three different projects that could help them do this: a customer service training program, an automated customer support system , and a customer satisfaction survey.

The company can use strategic portfolio analysis to evaluate each of these projects to determine which one will be the most beneficial for them. The first step is to define the objectives of the analysis. In this case, the objective is to improve customer service. The criteria for evaluating the projects will include their expected costs, expected returns, and the overall impact on customer service.

Next, the company will need to gather data about each of the projects. This data could include the estimated cost of the project , the estimated time to completion, the estimated impact on customer service, and the expected return on investment .

Then, the analyst will analyze the data to determine which project is most likely to yield the best returns and the lowest risks. They might use a scoring system to rank each project based on their criteria.

Finally, the analyst will select the project that has the greatest potential returns and the lowest risks. In this case, the company might choose to prioritize the customer service training program since it is likely to have the greatest impact on customer service and the greatest return on investment .

In conclusion, strategic portfolio analysis is a tool that can be used to evaluate various projects and initiatives to determine which ones will be most beneficial to the company. By using this tool, companies can more effectively evaluate their projects and initiatives to ensure that they are selecting the ones that will be most beneficial to the company and its strategic objectives .

When to use Strategic portfolio analysis

The use of strategic portfolio analysis is most beneficial when the company is faced with a large number of potential projects and initiatives, and needs to determine which ones to pursue. It is also useful when the company needs to weigh the risks and rewards associated with each project and determine which ones are most likely to yield the greatest returns.

Steps of Strategic portfolio analysis

  • Defining the objectives of the analysis : This involves determining what the company is trying to achieve, as well as the criteria that should be used to evaluate the various projects and initiatives.
  • Gathering data : The necessary data for the analysis is gathered, such as their expected costs and expected returns.
  • Analyzing the data : The data is analyzed to determine which projects and initiatives are most likely to yield the best returns, as well as the associated risks and rewards.
  • Selecting the optimal projects : The analyst will then select the projects and initiatives that have the greatest potential returns and the lowest risks.

By following these steps, companies can use strategic portfolio analysis to more effectively evaluate their projects and initiatives to ensure that they are selecting the ones that will be most beneficial to the company and its strategic objectives.

Advantages of Strategic portfolio analysis

  • Improved decision-making : The process of strategic portfolio analysis allows companies to more effectively evaluate the potential risks and rewards associated with each project, which helps them make more informed decisions about which projects to pursue.
  • Better resource allocation : By using strategic portfolio analysis, companies can more effectively allocate their resources to projects and initiatives that are most likely to yield the greatest returns.
  • Increased efficiency : Strategic portfolio analysis also helps companies become more efficient, as they can identify and prioritize projects that are most likely to have the desired impact.

Limitations of Strategic portfolio analysis

Despite its usefulness, there are a few limitations to strategic portfolio analysis. These include:

  • Difficulty in determining the true value of a project : One of the biggest challenges with strategic portfolio analysis is determining the true value of a project. This is because it is often difficult to accurately predict the outcome of a project.
  • Difficulty in obtaining accurate data : Accurate data is essential for successful strategic portfolio analysis, yet it can sometimes be difficult to obtain. This is especially true for projects with long-term horizons, as it can be difficult to predict the impact of such projects.
  • Subjectivity of the analysis : Another limitation of strategic portfolio analysis is that it relies heavily on the subjective opinion of the analyst. This can lead to biased results, as the analyst’s personal preferences may influence the outcome of the analysis.

Other approaches related to Strategic portfolio analysis

In addition to strategic portfolio analysis, there are several other approaches that can be used to assess potential projects and initiatives. These include:

  • Cost-Benefit Analysis : This approach involves analyzing the expected costs and benefits of a project or initiative to determine its overall profitability.
  • Risk-Return Analysis : This approach involves analyzing the potential risks and rewards associated with each project or initiative, in order to determine the optimal balance of risk and return.
  • Scenario Analysis : This approach involves creating multiple scenarios to evaluate the potential outcomes of a project or initiative.

By utilizing these various approaches, companies can gain a better understanding of the potential risks and rewards associated with each project or initiative, and can make better-informed decisions about which projects to pursue.

In conclusion, strategic portfolio analysis is a tool used to evaluate the various projects and initiatives that a company could pursue, by taking into account the expected costs and returns, as well as the risks and rewards associated with each project or initiative. Additionally, there are several other approaches that can be used to assess potential projects and initiatives, including cost-benefit analysis, risk-return analysis, and scenario analysis , in order to gain a better understanding of their potential outcomes and make more informed decisions.

  • Adner, R., & Levinthal, D. A. (2004). What is not a real option: Considering boundaries for the application of real options to business strategy . Academy of management review, 29(1), 74-85.
  • Bamberger, I. (1981). Strategic Management in Small and Medium Sized Firms by Portfolio Analysis?: A Theoretical and Empirical Study . Universit e de Rennes 1, Institut de Gestion de Rennes.
  • Cox Jr, W. E. (1974). Product Portfolio Strategy : An Analysis of the Boston Consulting Group Approach to Marketing Strategies . Proceeds of the American Marketing Association.
  • Howell III, J. I., & Tyler, P. A. (2001, January). Using portfolio analysis to develop corporate strategy . In SPE Hydrocarbon Economics and Evaluation Symposium. Society of Petroleum Engineers.
  • Morgan, N. A., & Rego, L. L. (2009). Brand portfolio strategy and firm performance . Journal of Marketing, 73(1), 59-74.
  • Pethia, R. F., & Saïas, M. (1978). Metalevel product-portfolio analysis: An enrichment of strategic planning suggested by organization theory . International Studies of Management & Organization , 8(4), 35-66.
  • Wind, Y., Mahajan, V., & Swire, D. I. (1982). Portfolio Analysis and Strategy .
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2.5 Strategic Portfolio Planning Approaches

Learning objectives.

  • Explain how SBUs are evaluated using the Boston Consulting Group matrix.
  • Explain how businesses and the attractiveness of industries are evaluated using the General Electric approach.

When a firm has multiple strategic business units like PepsiCo does, it must decide what the objectives and strategies for each business are and how to allocate resources among them. A group of businesses can be considered a portfolio , just as a collection of artwork or investments compose a portfolio. In order to evaluate each business, companies sometimes utilize what’s called a portfolio planning approach. A portfolio planning approach involves analyzing a firm’s entire collection of businesses relative to one another. Two of the most widely used portfolio planning approaches include the Boston Consulting Group (BCG) matrix and the General Electric (GE) approach.

The Boston Consulting Group Matrix

Figure 2.16 The Boston Consulting Group (BCG) Matrix

The Boston Consulting Group Matrix

The Boston Consulting Group (BCG) matrix helps companies evaluate each of its strategic business units based on two factors: (1) the SBU’s market growth rate (i.e., how fast the unit is growing compared to the industry in which it competes) and (2) the SBU’s relative market share (i.e., how the unit’s share of the market compares to the market share of its competitors). Because the BCG matrix assumes that profitability and market share are highly related, it is a useful approach for making business and investment decisions. However, the BCG matrix is subjective and managers should also use their judgment and other planning approaches before making decisions. Using the BCG matrix, managers can categorize their SBUs (products) into one of four categories, as shown in Figure 2.16 “The Boston Consulting Group (BCG) Matrix” .

Everyone wants to be a star. A star is a product with high growth and a high market share. To maintain the growth of their star products, a company may have to invest money to improve them and how they are distributed as well as promote them. The iPod, when it was first released, was an example of a star product.

A cash cow is a product with low growth and a high market share. Cash cows have a large share of a shrinking market. Although they generate a lot of cash, they do not have a long-term future. For example, DVD players are a cash cow for Sony. Eventually, DVDs are likely to be replaced by digital downloads, just like MP3s replaced CDs. Companies with cash cows need to manage them so that they continue to generate revenue to fund star products.

Question Marks or Problem Children

Did you ever hear an adult say they didn’t know what to do with a child? The same question or problem arises when a product has a low share of a high-growth market. Managers classify these products as question marks or problem children . They must decide whether to invest in them and hope they become stars or gradually eliminate or sell them. For example, as the price of gasoline soared in 2008, many consumers purchased motorcycles and mopeds, which get better gas mileage. However, some manufacturers have a very low share of this market. These manufacturers now have to decide what they should do with these products.

In business, it is not good to be considered a dog. A dog is a product with low growth and low market share. Dogs do not make much money and do not have a promising future. Companies often get rid of dogs. However, some companies are hesitant to classify any of their products as dogs. As a result, they keep producing products and services they shouldn’t or invest in dogs in hopes they’ll succeed.

The BCG matrix helps managers make resource allocation decisions once different products are classified. Depending on the product, a firm might decide on a number of different strategies for it. One strategy is to build market share for a business or product, especially a product that might become a star. Many companies invest in question marks because market share is available for them to capture. The success sequence is often used as a means to help question marks become stars. With the success sequence, money is taken from cash cows (if available) and invested into question marks in hopes of them becoming stars.

Holding market share means the company wants to keep the product’s share at the same level. When a firm pursues this strategy, it only invests what it has to in order to maintain the product’s market share. When a company decides to harvest a product, the firm lowers its investment in it. The goal is to try to generate short-term profits from the product regardless of the long-term impact on its survival. If a company decides to divest a product, the firm drops or sells it. That’s what Procter & Gamble did in 2008 when it sold its Folgers coffee brand to Smuckers. Proctor & Gamble also sold Jif peanut butter brand to Smuckers. Many dogs are divested, but companies may also divest products because they want to focus on other brands they have in their portfolio.

As competitors enter the market, technology advances, and consumer preferences change, the position of a company’s products in the BCG matrix is also likely to change. The company has to continually evaluate the situation and adjust its investments and product promotion strategies accordingly. The firm must also keep in mind that the BCG matrix is just one planning approach and that other variables can affect the success of products.

The General Electric Approach

Another portfolio planning approach that helps a business determine whether to invest in opportunities is the General Electric (GE) approach . The GE approach examines a business’s strengths and the attractiveness of the industry in which it competes. As we have indicated, a business’s strengths are factors internal to the company, including strong human resources capabilities (talented personnel), strong technical capabilities, and the fact that the firm holds a large share of the market. The attractiveness of an industry can include aspects such as whether or not there is a great deal of growth in the industry, whether the profits earned by the firms competing within it are high or low, and whether or not it is difficult to enter the market. For example, the automobile industry is not attractive in times of economic downturn such as the recession in 2009, so many automobile manufacturers don’t want to invest more in production. They want to cut or stop spending as much as possible to improve their profitability. Hotels and airlines face similar situations.

Companies evaluate their strengths and the attractiveness of industries as high, medium, and low. The firms then determine their investment strategies based on how well the two correlate with one another. As Figure 2.17 “The General Electric (GE) Approach” shows, the investment options outlined in the GE approach can be compared to a traffic light. For example, if a company feels that it does not have the business strengths to compete in an industry and that the industry is not attractive, this will result in a low rating, which is comparable to a red light. In that case, the company should harvest the business (slowly reduce the investments made in it), divest the business (drop or sell it), or stop investing in it, which is what happened with many automotive manufacturers.

Figure 2.17 The General Electric (GE) Approach

The General Electric Approach (Stoplight model)

Although many people may think a yellow light means “speed up,” it actually means caution. Companies with a medium rating on industry attractiveness and business strengths should be cautious when investing and attempt to hold the market share they have. If a company rates itself high on business strengths and the industry is very attractive (also rated high), this is comparable to a green light. In this case, the firm should invest in the business and build market share. During bad economic times, many industries are not attractive. However, when the economy improves businesses must reevaluate opportunities.

Key Takeaway

A group of businesses is called a portfolio. Organizations that have multiple business units must decide how to allocate resources to them and decide what objectives and strategies are feasible for them. Portfolio planning approaches help firms analyze the businesses relative to each other. The BCG and GE approaches are two or the most common portfolio planning methods.

Review Questions

  • How would you classify a product that has a low market share in a growing market?
  • What does it mean to hold market share?
  • What factors are used as the basis for analyzing businesses and brands using the BCG and the GE approaches?

Principles of Marketing Copyright © 2015 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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  • What is strategic planning? A 5-step gu ...

What is strategic planning? A 5-step guide

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Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. In this article, we'll guide you through the strategic planning process, including why it's important, the benefits and best practices, and five steps to get you from beginning to end.

Strategic planning is a process through which business leaders map out their vision for their organization’s growth and how they’re going to get there. The strategic planning process informs your organization’s decisions, growth, and goals.

Strategic planning helps you clearly define your company’s long-term objectives—and maps how your short-term goals and work will help you achieve them. This, in turn, gives you a clear sense of where your organization is going and allows you to ensure your teams are working on projects that make the most impact. Think of it this way—if your goals and objectives are your destination on a map, your strategic plan is your navigation system.

In this article, we walk you through the 5-step strategic planning process and show you how to get started developing your own strategic plan.

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What is strategic planning?

Strategic planning is a business process that helps you define and share the direction your company will take in the next three to five years. During the strategic planning process, stakeholders review and define the organization’s mission and goals, conduct competitive assessments, and identify company goals and objectives. The product of the planning cycle is a strategic plan, which is shared throughout the company.

What is a strategic plan?

[inline illustration] Strategic plan elements (infographic)

A strategic plan is the end result of the strategic planning process. At its most basic, it’s a tool used to define your organization’s goals and what actions you’ll take to achieve them.

Typically, your strategic plan should include: 

Your company’s mission statement

Your organizational goals, including your long-term goals and short-term, yearly objectives

Any plan of action, tactics, or approaches you plan to take to meet those goals

What are the benefits of strategic planning?

Strategic planning can help with goal setting and decision-making by allowing you to map out how your company will move toward your organization’s vision and mission statements in the next three to five years. Let’s circle back to our map metaphor. If you think of your company trajectory as a line on a map, a strategic plan can help you better quantify how you’ll get from point A (where you are now) to point B (where you want to be in a few years).

When you create and share a clear strategic plan with your team, you can:

Build a strong organizational culture by clearly defining and aligning on your organization’s mission, vision, and goals.

Align everyone around a shared purpose and ensure all departments and teams are working toward a common objective.

Proactively set objectives to help you get where you want to go and achieve desired outcomes.

Promote a long-term vision for your company rather than focusing primarily on short-term gains.

Ensure resources are allocated around the most high-impact priorities.

Define long-term goals and set shorter-term goals to support them.

Assess your current situation and identify any opportunities—or threats—allowing your organization to mitigate potential risks.

Create a proactive business culture that enables your organization to respond more swiftly to emerging market changes and opportunities.

What are the 5 steps in strategic planning?

The strategic planning process involves a structured methodology that guides the organization from vision to implementation. The strategic planning process starts with assembling a small, dedicated team of key strategic planners—typically five to 10 members—who will form the strategic planning, or management, committee. This team is responsible for gathering crucial information, guiding the development of the plan, and overseeing strategy execution.

Once you’ve established your management committee, you can get to work on the planning process. 

Step 1: Assess your current business strategy and business environment

Before you can define where you’re going, you first need to define where you are. Understanding the external environment, including market trends and competitive landscape, is crucial in the initial assessment phase of strategic planning.

To do this, your management committee should collect a variety of information from additional stakeholders, like employees and customers. In particular, plan to gather:

Relevant industry and market data to inform any market opportunities, as well as any potential upcoming threats in the near future.

Customer insights to understand what your customers want from your company—like product improvements or additional services.

Employee feedback that needs to be addressed—whether about the product, business practices, or the day-to-day company culture.

Consider different types of strategic planning tools and analytical techniques to gather this information, such as:

A balanced scorecard to help you evaluate four major elements of a business: learning and growth, business processes, customer satisfaction, and financial performance.

A SWOT analysis to help you assess both current and future potential for the business (you’ll return to this analysis periodically during the strategic planning process). 

To fill out each letter in the SWOT acronym, your management committee will answer a series of questions:

What does your organization currently do well?

What separates you from your competitors?

What are your most valuable internal resources?

What tangible assets do you have?

What is your biggest strength? 

Weaknesses:

What does your organization do poorly?

What do you currently lack (whether that’s a product, resource, or process)?

What do your competitors do better than you?

What, if any, limitations are holding your organization back?

What processes or products need improvement? 

Opportunities:

What opportunities does your organization have?

How can you leverage your unique company strengths?

Are there any trends that you can take advantage of?

How can you capitalize on marketing or press opportunities?

Is there an emerging need for your product or service? 

What emerging competitors should you keep an eye on?

Are there any weaknesses that expose your organization to risk?

Have you or could you experience negative press that could reduce market share?

Is there a chance of changing customer attitudes towards your company? 

Step 2: Identify your company’s goals and objectives

To begin strategy development, take into account your current position, which is where you are now. Then, draw inspiration from your vision, mission, and current position to identify and define your goals—these are your final destination. 

To develop your strategy, you’re essentially pulling out your compass and asking, “Where are we going next?” “What’s the ideal future state of this company?” This can help you figure out which path you need to take to get there.

During this phase of the planning process, take inspiration from important company documents, such as:

Your mission statement, to understand how you can continue moving towards your organization’s core purpose.

Your vision statement, to clarify how your strategic plan fits into your long-term vision.

Your company values, to guide you towards what matters most towards your company.

Your competitive advantages, to understand what unique benefit you offer to the market.

Your long-term goals, to track where you want to be in five or 10 years.

Your financial forecast and projection, to understand where you expect your financials to be in the next three years, what your expected cash flow is, and what new opportunities you will likely be able to invest in.

Step 3: Develop your strategic plan and determine performance metrics

Now that you understand where you are and where you want to go, it’s time to put pen to paper. Take your current business position and strategy into account, as well as your organization’s goals and objectives, and build out a strategic plan for the next three to five years. Keep in mind that even though you’re creating a long-term plan, parts of your plan should be created or revisited as the quarters and years go on.

As you build your strategic plan, you should define:

Company priorities for the next three to five years, based on your SWOT analysis and strategy.

Yearly objectives for the first year. You don’t need to define your objectives for every year of the strategic plan. As the years go on, create new yearly objectives that connect back to your overall strategic goals . 

Related key results and KPIs. Some of these should be set by the management committee, and some should be set by specific teams that are closer to the work. Make sure your key results and KPIs are measurable and actionable. These KPIs will help you track progress and ensure you’re moving in the right direction.

Budget for the next year or few years. This should be based on your financial forecast as well as your direction. Do you need to spend aggressively to develop your product? Build your team? Make a dent with marketing? Clarify your most important initiatives and how you’ll budget for those.

A high-level project roadmap . A project roadmap is a tool in project management that helps you visualize the timeline of a complex initiative, but you can also create a very high-level project roadmap for your strategic plan. Outline what you expect to be working on in certain quarters or years to make the plan more actionable and understandable.

Step 4: Implement and share your plan

Now it’s time to put your plan into action. Strategy implementation involves clear communication across your entire organization to make sure everyone knows their responsibilities and how to measure the plan’s success. 

Make sure your team (especially senior leadership) has access to the strategic plan, so they can understand how their work contributes to company priorities and the overall strategy map. We recommend sharing your plan in the same tool you use to manage and track work, so you can more easily connect high-level objectives to daily work. If you don’t already, consider using a work management platform .  

A few tips to make sure your plan will be executed without a hitch: 

Communicate clearly to your entire organization throughout the implementation process, to ensure all team members understand the strategic plan and how to implement it effectively. 

Define what “success” looks like by mapping your strategic plan to key performance indicators.

Ensure that the actions outlined in the strategic plan are integrated into the daily operations of the organization, so that every team member's daily activities are aligned with the broader strategic objectives.

Utilize tools and software—like a work management platform—that can aid in implementing and tracking the progress of your plan.

Regularly monitor and share the progress of the strategic plan with the entire organization, to keep everyone informed and reinforce the importance of the plan.

Establish regular check-ins to monitor the progress of your strategic plan and make adjustments as needed. 

Step 5: Revise and restructure as needed

Once you’ve created and implemented your new strategic framework, the final step of the planning process is to monitor and manage your plan.

Remember, your strategic plan isn’t set in stone. You’ll need to revisit and update the plan if your company changes directions or makes new investments. As new market opportunities and threats come up, you’ll likely want to tweak your strategic plan. Make sure to review your plan regularly—meaning quarterly and annually—to ensure it’s still aligned with your organization’s vision and goals.

Keep in mind that your plan won’t last forever, even if you do update it frequently. A successful strategic plan evolves with your company’s long-term goals. When you’ve achieved most of your strategic goals, or if your strategy has evolved significantly since you first made your plan, it might be time to create a new one.

Build a smarter strategic plan with a work management platform

To turn your company strategy into a plan—and ultimately, impact—make sure you’re proactively connecting company objectives to daily work. When you can clarify this connection, you’re giving your team members the context they need to get their best work done. 

A work management platform plays a pivotal role in this process. It acts as a central hub for your strategic plan, ensuring that every task and project is directly tied to your broader company goals. This alignment is crucial for visibility and coordination, allowing team members to see how their individual efforts contribute to the company’s success. 

By leveraging such a platform, you not only streamline workflow and enhance team productivity but also align every action with your strategic objectives—allowing teams to drive greater impact and helping your company move toward goals more effectively. 

Strategic planning FAQs

Still have questions about strategic planning? We have answers.

Why do I need a strategic plan?

A strategic plan is one of many tools you can use to plan and hit your goals. It helps map out strategic objectives and growth metrics that will help your company be successful.

When should I create a strategic plan?

You should aim to create a strategic plan every three to five years, depending on your organization’s growth speed.

Since the point of a strategic plan is to map out your long-term goals and how you’ll get there, you should create a strategic plan when you’ve met most or all of them. You should also create a strategic plan any time you’re going to make a large pivot in your organization’s mission or enter new markets. 

What is a strategic planning template?

A strategic planning template is a tool organizations can use to map out their strategic plan and track progress. Typically, a strategic planning template houses all the components needed to build out a strategic plan, including your company’s vision and mission statements, information from any competitive analyses or SWOT assessments, and relevant KPIs.

What’s the difference between a strategic plan vs. business plan?

A business plan can help you document your strategy as you’re getting started so every team member is on the same page about your core business priorities and goals. This tool can help you document and share your strategy with key investors or stakeholders as you get your business up and running.

You should create a business plan when you’re: 

Just starting your business

Significantly restructuring your business

If your business is already established, you should create a strategic plan instead of a business plan. Even if you’re working at a relatively young company, your strategic plan can build on your business plan to help you move in the right direction. During the strategic planning process, you’ll draw from a lot of the fundamental business elements you built early on to establish your strategy for the next three to five years.

What’s the difference between a strategic plan vs. mission and vision statements?

Your strategic plan, mission statement, and vision statements are all closely connected. In fact, during the strategic planning process, you will take inspiration from your mission and vision statements in order to build out your strategic plan.

Simply put: 

A mission statement summarizes your company’s purpose.

A vision statement broadly explains how you’ll reach your company’s purpose.

A strategic plan pulls in inspiration from your mission and vision statements and outlines what actions you’re going to take to move in the right direction. 

For example, if your company produces pet safety equipment, here’s how your mission statement, vision statement, and strategic plan might shake out:

Mission statement: “To ensure the safety of the world’s animals.” 

Vision statement: “To create pet safety and tracking products that are effortless to use.” 

Your strategic plan would outline the steps you’re going to take in the next few years to bring your company closer to your mission and vision. For example, you develop a new pet tracking smart collar or improve the microchipping experience for pet owners. 

What’s the difference between a strategic plan vs. company objectives?

Company objectives are broad goals. You should set these on a yearly or quarterly basis (if your organization moves quickly). These objectives give your team a clear sense of what you intend to accomplish for a set period of time. 

Your strategic plan is more forward-thinking than your company goals, and it should cover more than one year of work. Think of it this way: your company objectives will move the needle towards your overall strategy—but your strategic plan should be bigger than company objectives because it spans multiple years.

What’s the difference between a strategic plan vs. a business case?

A business case is a document to help you pitch a significant investment or initiative for your company. When you create a business case, you’re outlining why this investment is a good idea, and how this large-scale project will positively impact the business. 

You might end up building business cases for things on your strategic plan’s roadmap—but your strategic plan should be bigger than that. This tool should encompass multiple years of your roadmap, across your entire company—not just one initiative.

What’s the difference between a strategic plan vs. a project plan?

A strategic plan is a company-wide, multi-year plan of what you want to accomplish in the next three to five years and how you plan to accomplish that. A project plan, on the other hand, outlines how you’re going to accomplish a specific project. This project could be one of many initiatives that contribute to a specific company objective which, in turn, is one of many objectives that contribute to your strategic plan. 

What’s the difference between strategic management vs. strategic planning?

A strategic plan is a tool to define where your organization wants to go and what actions you need to take to achieve those goals. Strategic planning is the process of creating a plan in order to hit your strategic objectives.

Strategic management includes the strategic planning process, but also goes beyond it. In addition to planning how you will achieve your big-picture goals, strategic management also helps you organize your resources and figure out the best action plans for success. 

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What is Strategic Analysis? 8 Best Strategic Analysis Tools + Examples

Download our free Internal Analysis Template Download this template

A huge part of developing a strategic plan is a reliable, in-depth strategic analysis. An organization is separated into internal and external environments. Both components should be scrutinized to identify factors influencing organizations and guiding decision-making.

In this article, we'll cover:

What Is Strategic Analysis?

Types of strategic analysis, benefits of strategic analysis for strategy formulation, strategic analysis example - walmart, how to do a strategic analysis: key components, strategic analysis tools, how to choose the right strategic analysis tool, the next step: from analysis to action with cascade 🚀.

Free Download Download our Internal Analysis Template Download this template

Strategic analysis is the process of researching and analyzing an organization along with the business environment in which it operates to formulate an effective strategy. This process of strategy analysis usually includes defining the internal and external environments, evaluating identified data, and utilizing strategic analysis tools.

By conducting strategic analysis, companies can gain valuable insights into what's working well and what areas need improvement. These valuable insights become key inputs for the strategic planning process , helping businesses make well-informed decisions to thrive and grow.

When it comes to strategic analysis, businesses employ different approaches to gain insights into their inner workings and the external factors influencing their operations.

Let's explore two key types of strategic analysis:

Internal strategic analysis

The focus of internal strategic analysis is on diving deep into the organization's core. It involves a careful examination of the company's strengths, weaknesses, resources, and competencies. By conducting a thorough assessment of these aspects, businesses can pinpoint areas of competitive advantage, identify potential bottlenecks, and uncover opportunities for improvement.

This introspective analysis acts as a mirror , reflecting the organization's current standing, and provides valuable insights to shape the path that will ultimately lead to achieving its mission statement.

External strategic analysis

On the other hand, external strategic analysis zooms out to consider the broader business environment. This entails conducting market analysis, trend research, and understanding customer behaviors, regulatory changes, technological advancements, and competitive forces. By understanding these external dynamics, organizations can anticipate potential threats and uncover opportunities that can significantly impact their strategic decision-making.

The external strategic analysis acts as a window , offering a view of the ever-changing business landscape.

The analysis phase sets “the stage” for your strategy formulation.

The strategic analysis informs the activities you undertake in strategic formulation and allows you to make informed decisions. This phase not only sets the stage for the development of effective business planning but also plays a crucial role in accurately framing the challenges to be addressed.

These are some benefits of strategic analysis for strategy formulation:

  • Holistic View : Gain a comprehensive understanding of internal capabilities, the external landscape, and potential opportunities and threats.
  • Accurate Challenge Framing : Identify and define core challenges accurately, shaping the strategy development process. ‍
  • Proactive Adaptation : Anticipate potential bottlenecks and areas for improvement, fostering proactive adaptability. ‍
  • Leveraging Strengths : Develop strategies that maximize organizational strengths for a competitive advantage.

At the very least, the right framing can improve your understanding of your competitors and, at its best, revolutionize an industry. For example, everybody thought that the early success of Walmart was due to Sam Walton breaking the conventional wisdom:

“A full-line discount store needs a population base of at least 100,000.”

But that’s not true.

Sam Walton didn’t break that rule, he redefined the idea of the “store,” replacing it with that of a “network of stores.” That led to reframing conventional wisdom, developing a coherent strategy, and revolutionizing an industry.

📚 Check out our #StrategyStudy: How Walmart Became The Retailer Of The People

how to do a strategic analysis graphic

Strategy is not a linear process.

Strategy is an iterative process where strategic planning and execution interact with each other constantly.

First, you plan your strategy, and then you implement it and constantly monitor it. Tracking the progress of your initiatives and KPIs (key performance indicators) allows you to identify what's working and what needs to change. This feedback loop guides you to reassess and readjust your strategic plan before proceeding to implementation again. This iterative approach ensures adaptability and enhances the strategy's effectiveness in achieving your goals.

Strategic planning includes the strategic analysis process.

The content of your strategic analysis varies, depending on the strategy level at which you're completing the strategic analysis.

For example, a team involved in undertaking a strategic analysis for a corporation with multiple businesses will focus on different things compared to a team within a department of an organization.

But no matter the team or organization's nature, whether it's a supply chain company aiming to enhance its operations or a marketing team at a retail company fine-tuning its marketing strategy, conducting a strategic analysis built on key components establishes a strong foundation for well-informed and effective decision-making.

The key components of strategic analysis are:

Define the strategy level for the analysis

  • Complete an internal analysis
  • Complete an external analysis

Unify perspectives & communicate insights

strategic analysis key components example

Strategy comes in different levels depending on where you are in an organization and your organization's size.

You may be creating a strategy to guide the direction of an entire organization with multiple businesses, or you may be creating a strategy for your marketing team. As such, the process will differ for each level as there are different objectives and needs.

The three strategy levels are:

  • Corporate Strategy
  • Business Strategy
  • Functional Strategy

👉🏻If you're not sure which strategy level you're completing your strategy analysis for, read this article explaining each of the strategy levels .

Conduct an internal analysis

As we mentioned earlier, an internal analysis looks inwards at the organization and assesses the elements that make up the internal environment. Performing an internal analysis allows you to identify the strengths and weaknesses of your organization.

Let's take a look at the steps involved in completing an internal analysis:

1. Assessment of tools to use

First, you need to decide what tool or framework you will use to conduct the analysis.

You can use many tools to assist you during an internal analysis. We delve into that a bit later in the article, but to give you an idea, for now, Gap Analysis , Strategy Evaluation , McKinsey 7S Model , and VRIO are all great analysis techniques that can be used to gain a clear picture of your internal environment.

2. Research and collect information

Now it’s time to move into research . Once you've selected the tool (or tools) you will use, you will start researching and collecting data.

The framework you use should give you some structure around what information and data you should look at and how to draw conclusions.

3. Analyze information

The third step is to process the collected information. After the data research and collection stage, you'll need to start analyzing the data and information you've gathered.

How will the data and information you've gathered have an impact on your business or a potential impact on your business? Looking at different scenarios will help you pull out possible impacts.

4. Communicate key findings

The final step of an internal analysis is sharing your conclusions . What is the value of your analysis’ conclusions if nobody knows about them?

You should be communicating your findings to the rest of the team involved in the analysis and go even further. Share relevant information with the rest of your people to demonstrate that you trust them and offer context to your decisions.

Once the internal analysis is complete , the organization should have a clear idea of where they're excelling, where they're doing OK, and where current deficits and gaps lie.

The analysis provides your leadership team with valuable insights to capitalize on strengths and opportunities effectively. It also empowers them to devise strategies that address potential threats and counteract identified weaknesses.

Beginning strategy formulation after this analysis will ensure your strategic plan has been crafted to take advantage of strengths and opportunities and offset or improve weaknesses & threats. This way, the strategic management process remains focused on the identified priorities, enabling a well-informed and proactive approach to achieving your organizational goals.

You can then be confident that you're funneling your resources, time, and focus effectively and efficiently.

Conduct an external analysis

As we stated before, the other type of strategic analysis is the external analysis which looks at an organization's environment and how those environmental factors currently impact or could impact the organization.

A key difference between the external and the internal factors lies in the organization's level of control.

Internally, the organization wields complete control and can actively influence these factors. On the other hand, external components lie beyond the organization's direct control, and the focus is on scanning and reacting to the environment rather than influencing it.

External factors of the organization include the industry the organization competes in, the political and legal landscape the organization operates in, and the communities they operate in.

The steps for conducting an external analysis are much the same as an internal analysis:

  • Assessment of tools to use
  • Research and collect information
  • Analyze information
  • Communicate key findings

You'll want to use a tool such as SWOT analysis , PESTLE analysis , or Porter's Five Forces to help you add some structure to your analysis. We’ll dive into the tools in more detail further down this article!

Chances are, you didn't tackle the entire analysis alone. Different team members likely took responsibility for specific parts, such as the internal gap analysis or external environmental scan. Each member contributed valuable insights, forming a mosaic of information.

To ensure a comprehensive understanding, gather feedback from all team members involved. Collate all the data and share the complete picture with relevant stakeholders across your organization.

Much like strategy, this information is useless if not shared with everyone.

Remember : There is no such thing as overcommunication.

If you have to keep only one rule of communication, it’s that one. Acting on the insights and discoveries distilled from the analysis is what gives them value. Communicating those findings with your employees and all relevant (internal and external) stakeholders enables acting on them.

Setting up a central location where everyone can access the data should be your first step, but it shouldn't end there. Organize a meeting to go through all the key findings and ensure everyone is on the same page regarding the organization's environment.

There are a number of strategic analysis tools at your disposal. We'll show you 8 of the best strategic analysis tools out there.

strategic management tools infographic for strategy analysisy

The 8 best strategic analysis tools:

Gap analysis, vrio analysis, four corners analysis, value chain analysis.

  • SWOT Analysis

Strategy Evaluation

Porter's five forces, pestel analysis.

Note: Analytical tools rely on historical data and prior situations to infer future assumptions. With this in mind, caution should always be used when making assumptions based on your strategic analysis findings.

The Gap Analysis is a great internal analysis tool that helps you identify the gaps in your organization, impeding your progress towards your objectives and vision.

The analysis gives you a process for comparing your organization's current state to its desired future state to draw out the current gaps, which you can then create a series of actions that will bridge the identified gap.

The gap analysis approach to strategic planning is one of the best ways to start thinking about your goals in a structured and meaningful way and focuses on improving a specific process.

👉 Grab your free Gap Analysis template to streamline the process!

Download the gap analysis template.  Utilize our free gap analysis template to kickstart your strategic analysis! Download Now

The VRIO Analysis is an internal analysis tool for evaluating your resources.

It identifies organizational resources that may potentially create sustainable competitive advantages for the organization. This analysis framework gives you a process for categorizing the resources in your organization based on whether they hold certain traits: Valuable, Rare, Inimitable, and Organized.

The framework then encourages you to begin thinking about moving those resources to the “next step'' to ultimately develop those resources into competitive advantages.

👉 Grab your free VRIO strategy template that will help you to develop and execute a strategy based on your VRIO analysis.

The Four Corners Analysis framework is another internal analysis tool that focuses on your organization's core competencies.

However, what differentiates this tool from the others is its long-term focus. To clarify, most of the other tools evaluate the current state of an entity, but the Four Corners Analysis assesses the company’s future strategy, which is more precise because it makes the corporation one step ahead of its competitors.

By using the Four Corners, you will know your competitors’ motivation and their current strategies powered by their capabilities. This analysis will aid you in formulating the company’s trend or predictive course of action.

Similar to VRIO, the Value Chain Analysis is a great tool to identify and help establish a competitive advantage for your organization.

The Value Chain framework achieves this by examining the range of activities in the business to understand the value each brings to the final product or service.

The concept of this strategy tool is that each activity should directly or indirectly add value to the final product or service. If you are operating efficiently, you should be able to charge more than the total cost of adding that value.

A SWOT analysis is a simple yet ridiculously effective way of conducting a strategic analysis.

It covers both the internal and external perspectives of a business.

When using SWOT, one thing to keep in mind is the importance of using specific and verifiable statements. Otherwise, you won’t be able to use that information to inform strategic decisions.

👉 Grab your free SWOT Analysis template to streamline the process!

Generally, every company will have a previous strategy that needs to be taken into consideration during a strategic analysis.

Unless you're a brand new start-up, there will be some form of strategy in the company, whether explicit or implicit. This is where a strategy evaluation comes into play.

The previous strategy shouldn't be disregarded or abandoned, even if you feel like it wasn't the right direction or course of action. Analyzing why a certain direction or course of action was decided upon will inform your choice of direction.

A Strategic Evaluation looks into the strategy previously or currently implemented throughout the organization and identifies what went well, what didn't go so well, what should not have been there, and what could be improved upon.

👉To learn more about this analysis technique, read our detailed guide on how to conduct a comprehensive Strategy Evaluation .

Complementing an internal analysis should always be an analysis of the external environment, and Porter's Five Forces is a great tool to help you achieve this.

Porter's Five Forces framework performs an external scan and helps you get a picture of the current market your organization is playing in by answering questions such as:

  • Why does my industry look the way it does today?
  • What forces beyond competition shape my industry?
  • How can I find a position among my competitors that ensures profitability?
  • What strategies can I implement to make this position challenging for them to replicate?

With the answer to the above questions, you'll be able to start drafting a strategy to ensure your organization can find a profitable position in the industry.

👉 Grab your free Porter’s 5 Forces template to implement this framework!

We might sound repetitive, but external analysis tools are critical to your strategic analysis.

The environment your organization operates in will heavily impact your organization's success. PESTEL analysis is one of the best external analysis tools you can use due to its broad nature.

The name PESTEL is an acronym for the elements that make up the framework:

  • Technological
  • Environmental

Basically, the premise of the analysis is to scan each of the elements above to understand the current status and how they can potentially impact your industry and, thus, your organization.

PESTEL gives you extra focus on certain elements that may have a wide-ranging impact, and a birds-eye view of the macro-environmental factors.

There are as many ways to do strategy as there are organizations. So not every tool is appropriate for every organization.

These 8 tools are our top picks for giving you a helping hand through your strategic analysis. They're by no means the whole spectrum. There are many other frameworks and tools out there that could be useful and provide value to your process.

Choose the tools that fit best with your approach to doing strategy. Don’t limit yourself to one tool if it doesn’t make sense, don’t be afraid to combine them, mix and match! And, be faithful to each framework but always as long as it fits your organization’s needs.

Completing the strategic analysis phase is a crucial milestone, but it's only the beginning of a successful journey. Now comes the vital task of formulating a plan and ensuring its effective execution. This is where Cascade comes into play, offering a powerful solution to drive your strategy forward.

Cascade is your ultimate partner in strategy execution. With its user-friendly interface and robust features, it empowers you to translate the strategic insights distilled from your strategic analysis into actionable plans.

Some key features include:

  • Planner : Seamlessly build out your objectives, initiatives, and key performance indicators (KPIs) while aligning them with the organization's goals. Break down the complexity from high-level initiative to executable outcomes. ‍
  • Alignment Map : Visualize how different organizational plans work together and how your corporate strategy breaks down into operational and functional plans.

alignment map in cascade strategy execution platorm

  • ‍ Metrics & Measures : Connect your business data directly to your core initiatives in Cascade for clear data-driven alignment. ‍

metrics library in cascade strategy execution platform

  • Integrations : Consolidate your business systems underneath a unified roof. Import context in real-time by leveraging Cascade’s native, third-party connector (Zapier/PA), and custom integrations. ‍
  • Dashboards & Reports : Stay informed about your strategy's performance at every stage with Cascade's real-time tracking and progress monitoring, and share it with your stakeholders, suppliers, and contractors.

Experience the power of Cascade today! Sign up today for a free forever plan or book a guided 1:1 tour with one of our Cascade in-house strategy execution experts.

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Chapter 8: Selecting Corporate-Level Strategies

Portfolio Planning and Corporate-Level Strategy

Learning Objectives

  • Understand why a firm would want to use portfolio planning.
  • Be able to explain the limitations of portfolio planning.

Executives in charge of firms that are involved in many different businesses must figure out how to manage such portfolios. General Electric (GE), for example, competes in a very wide variety of industries, including financial services, insurance, television, theme parks, electricity generation, lightbulbs, robotics, medical equipment, railroad locomotives, and aircraft jet engines. When leading a company such as GE, executives must decide which business units to grow, which ones to shrink, and which ones to abandon.

Portfolio planning  can be a useful tool. Portfolio planning is a process that helps executives assess their firms’ prospects for success within each of its industries, offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across industries. Portfolio planning first gained widespread attention in the 1970s, and it remains a popular tool among executives today.

The Boston Consulting Group (BCG) Matrix

The Boston Consulting Group (BCG) matrix is the best-known approach to portfolio planning ( Figure 8.20 “The Boston Consulting Group (BCG) Matrix” ). Using the matrix requires that each businesses unit owned by a firm be categorized along two dimensions: its share of the market and the growth rate of its industry. High market share units within slow-growing industries are called cash cows . Because their industries have bleak growth prospects, profits from cash cows should not be invested back into cash cows but rather diverted to more promising growth businesses. This is not to suggest that cash cows are not to be carefully managed to ensure that the maximum total profits are not “harvested,” just that investments decisions must be grounded in a different set of values for cash cows.

Low-market-share units within slow-growing industries are called dogs .  These units are good candidates for divestment because of the low return on investment in maintaining a market presence. High-market-share units within fast-growing industries are called stars . These units have bright prospects and thus are good candidates for growth and form the basis of the future success of the firm. Finally, low-market-share units within fast-growing industries are called question marks . Executives must decide whether to attempt to build these units into stars or to divest them.

The BCG matrix is just one portfolio planning technique. A different technique, developed with the help of a leading consulting firm for GE, is the attractiveness-strength matrix, which also examines diverse activities. This planning approach involves rating each of a firm’s businesses in terms of the attractiveness of the industry and the firm’s strength within the industry. Each dimension is divided into three categories, resulting in nine boxes. Each of these boxes has a set of recommendations associated with it. (Internet Center for Management and Business Administration Inc, 2009-2010).

Limitations to Portfolio Planning

Although portfolio planning is a useful tool, this tool has important limitations. First, portfolio planning oversimplifies the reality of competition by focusing on just two dimensions when analyzing a company’s operations within an industry. Many dimensions are important to consider before making strategic decisions, not just two. Second, portfolio planning can create motivational problems among employees. For example, if workers know that their firm’s executives believe in the BCG matrix and that their subsidiary is classified as a dog, then they may reduce their effort and motivation. Similarly, workers within cash cow units could become dismayed once they realize that the profits that they help create will be diverted to boost other areas of the firm. Third, portfolio planning does not help identify new opportunities. Because this tool only deals with existing businesses, it cannot reveal what new industries a firm should consider entering.

Key Takeaways

  • Portfolio planning is a useful tool for analyzing a firm’s operations, but this tool has limitations. The BCG matrix is one of the most widely used approaches to portfolio planning.
  • Is market share a good dimension to use when analyzing the prospects of a business? Why or why not?
  • What might executives do to keep employees within dog units motivated and focused on their jobs?

Internet Center for Management and Business Administration Inc.  (2009-2010).  GE/McKinsey Matrix . Retrieved from http://www.quickmba.com/strategy/matrix/ge-mckinsey/

The Boston Consulting Group, Inc. 1973   Reprint No. 135.  The Experience Curve – Reviewed. IV.  The Growth Share Matrix or the Product Portfolio. Retrieved from http://www.bcg.com/documents/file13904.pdf

Image description

Figure 8.20 image description: The Boston Consulting Group (BCG) Matrix

The Boston Consulting Group (BCG) matrix is the best-known approach to portfolio planning – assessing a firm’s prospects for success within the industries in which it competes. The matrix categorizes businesses as high or low along two dimensions — the firm’s market share in each industry and the growth rate of each industry. Suggestions are then offered about how to approach each industry.

Return to Figure 8.20

Media Attributions

  • Cara de quem caiu do caminhão… © Anderson Nascimento is licensed under a CC BY (Attribution) license
  • Figure 8.20: Attribution information for all included images is in the chapter conclusion.

A process that helps executives make decisions involving their firms’ various industries.

High market share units within slow-growing industries.

Low-market-share units within slow-growing industries.

High-market-share units within fast-growing industries.

Low-market-share units within fast-growing industries.

Mastering Strategic Management - 1st Canadian Edition by Janice Edwards is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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2.2 Marketing’s Role in the Strategic Planning Process: Portfolio Analysis

The marketing department contributes to the strategic planning process in multiple ways.  It provides a portfolio analysis (discussed below), and conducts an Environmental Scan to develop a SWOT analysis (discussed in the next chapter).  These two components of the strategic planning process provide the foundation for decision making and growth opportunities.

Strategic Business Units and Portfolio Analysis

Strategic business units (sbus).

As previously mentioned, strategic planning is a long-term process that helps an organization allocate its resources to take advantage of different opportunities. In addition to marketing plans, strategic planning may occur at different levels within an organization. For example, in large organizations top executives will develop strategic plans for the corporation. These are corporate-level plans. In addition, many large firms have different divisions, or businesses, called strategic business units. A strategic business unit (SBU) is a business or product line within an organization that 1) has its own competitors, customers, and 2) profit center for accounting purposes. A firm’s SBUs may also have 3) their own mission statement (purpose) and will generally develop strategic plans for themselves. These are called business-level plans. The different departments, or functions (accounting, finance, marketing, and so forth) within a company or SBU, might also develop strategic plans. For example, a company may develop a marketing plan or a financial plan, which are functional-level plans.

The figure below shows an example of different strategic planning levels that can exist within an organization’s structure. The number of levels can vary, depending on the size and structure of an organization. Not every organization will have every level or have every type of plan.

discuss strategic planning business portfolio analysis

Portfolio Analysis

When a firm has multiple strategic business units, it must determine the objectives and strategies for each SBU and how to allocate resources among the various SBUs. A group of SBUs can be considered a portfolio, just as a collection of artwork or investments compose a portfolio. To evaluate each business unit, companies sometimes utilize what is called a portfolio planning approach. A portfolio planning approach involves analyzing a firm’s entire collection of business units relative to one another. One of the most widely used portfolio planning approaches was developed by the Boston Consulting Group (BCG).

Most businesses have limited resources and need to determine how to allocate those resources.  Using the portfolio planning approach allows businesses to see the various business segments and determine which ones should be grown, which will be just maintained, and which will help to fund the growth of others.  This approach ensures that SBU strategies are complementary to each other and that all are working towards achieving the objectives of the organization.

The Boston Consulting Group Matrix (a.k.a “Growth / Share Matrix”)

The Boston Consulting Group (BCG) matrix helps companies evaluate each of its strategic business units based on two factors: (1) the SBU’s market growth rate (i.e., how fast the unit is growing compared to the industry in which it competes) and (2) the SBU’s relative market share (i.e., how the unit’s share of the market compares to the market share of its competitors). Because the BCG matrix assumes that profitability and market share are highly related, it is a useful approach for making business and investment decisions. However, the BCG matrix is subjective, and managers should also use their judgment and other planning approaches before making decisions. Using the BCG matrix, managers can categorize their SBUs (products) into one of four categories. We will now look at each of the four categories, or quadrants, in the matrix.

Figure 2.2.2: Boston Consulting Group (BCG) Matrix

image

image courtesy of https://courses.lumenlearning.com/clinton-marketing/chapter/reading-the-bcg-matrix/

When you hear the term ‘star’, you probably think ‘the best’. Everyone wants to be a star. However, is that reaction a valid one? A star is a product with high growth potential and a high market share compared to the competition. To maintain the growth of the star products, a company will need to invest money to keep the product competitive, improve distribution channels and to promote. This expense can be quite large. So the question becomes, is this star profitable? Does the revenue generated from the star exceed its expenses? Sometimes a star can lose money or barely be profitable. They are not always ‘the best’ as the term ‘star’ implies.

The term ‘cash cow’ is one that many of you have probably heard before without really understanding what it means. A cash cow is a product with low growth opportunities and a relatively high market share. Cash cows have a large share of a shrinking market. Although they generate a lot of cash, they do not have a long-term future.  While resources need to be invested in the cash cow to keep it competitive, they do not require the same investments as stars do. Companies with cash cows need to manage them so that they continue to generate revenue to fund other products.

Question Marks or Problem Children

Did you ever hear an adult say they did not know what to do with a child? The same question or problem arises when a product has a low share of a high-growth market. Managers classify these products as question marks or problem children. The business managers must decide whether to invest in question marks and hope they become stars or gradually eliminate or sell them. Question marks are not profitable but have a chance of being turned into a star, with the right investment.

A dog is a product with low growth and low market share. Dogs do not make much money and do not have a promising future. There is a negative image that many have of dogs but, the truth is, they can be profitable and might be able to fund investment in a question mark either by their limited profits, by selling them off, or by discontinuing them thus freeing up resources. Most of the everyday products you use, are considered dogs. They are smaller products that don’t generate a large amount of revenue but enough revenue to justify their existence. In fact, most products are classified as dogs.

The BCG matrix helps managers make resource allocation decisions. Depending on the product, a firm might decide on several different strategies. One strategy is to build market share for a business or product, especially a product that might become a star. Many companies invest in question marks because potential market share is available for them to capture. The success sequence is often used to help question marks become stars. With the success sequence, money is taken from cash cows (if available) and invested into question marks in hopes of them becoming stars.

Holding market share means the company wants to keep the product’s share at the same level. When a firm pursues this strategy, it only invests what it must to maintain the product’s market share. When a company decides to harvest a product, the firm lowers its investment in it. The goal is to try to generate short-term profits from the product regardless of the long-term impact on its survival. If a company decides to divest a product, the firm drops or sells it. That is what Procter & Gamble did in 2008 when it sold its Folgers coffee brand to Smuckers. Proctor & Gamble also sold Jif peanut butter brand to Smuckers. Many dogs are divested, but companies may also divest products because they want to focus on other brands they have in their portfolio.

As competitors enter the market, technology advances, and consumer preferences change, the position of a company’s products in the BCG matrix is also likely to change. The company must continually evaluate the situation and adjust its investments and product promotion strategies accordingly. The firm must also keep in mind that the BCG matrix is just one planning approach and that other variables can affect the success of products.

You Try It!

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  • 2.2 The Role of Marketing in the Strategic Planning Process
  • 1 Unit Introduction
  • In the Spotlight
  • 1.1 Marketing and the Marketing Process
  • 1.2 The Marketing Mix and the 4Ps of Marketing
  • 1.3 Factors Comprising and Affecting the Marketing Environment
  • 1.4 Evolution of the Marketing Concept
  • 1.5 Determining Consumer Needs and Wants
  • 1.6 Customer Relationship Management (CRM)
  • 1.7 Ethical Marketing
  • Chapter Summary
  • Applied Marketing Knowledge: Discussion Questions
  • Critical Thinking Exercises
  • Building Your Personal Brand
  • What Do Marketers Do?
  • Marketing Plan Exercise
  • Closing Company Case
  • 2.1 Developing a Strategic Plan
  • 2.3 Purpose and Structure of the Marketing Plan
  • 2.4 Marketing Plan Progress Using Metrics
  • 2.5 Ethical Issues in Developing a Marketing Strategy
  • 2 Unit Introduction
  • 3.1 Understanding Consumer Markets and Buying Behavior
  • 3.2 Factors That Influence Consumer Buying Behavior
  • 3.3 The Consumer Purchasing Decision Process
  • 3.4 Ethical Issues in Consumer Buying Behavior
  • 4.1 The Business-to-Business (B2B) Market
  • 4.2 Buyers and Buying Situations in a B2B Market
  • 4.3 Major Influences on B2B Buyer Behavior
  • 4.4 Stages in the B2B Buying Process
  • 4.5 Ethical Issues in B2B Marketing
  • 5.1 Market Segmentation and Consumer Markets
  • 5.2 Segmentation of B2B Markets
  • 5.3 Segmentation of International Markets
  • 5.4 Essential Factors in Effective Market Segmentation
  • 5.5 Selecting Target Markets
  • 5.6 Product Positioning
  • 5.7 Ethical Concerns and Target Marketing
  • 6.1 Marketing Research and Big Data
  • 6.2 Sources of Marketing Information
  • 6.3 Steps in a Successful Marketing Research Plan
  • 6.4 Ethical Issues in Marketing Research
  • 7.1 The Global Market and Advantages of International Trade
  • 7.2 Assessment of Global Markets for Opportunities
  • 7.3 Entering the Global Arena
  • 7.4 Marketing in a Global Environment
  • 7.5 Ethical Issues in the Global Marketplace
  • 8.1 Strategic Marketing: Standardization versus Adaptation
  • 8.2 Diversity and Inclusion Marketing
  • 8.3 Multicultural Marketing
  • 8.4 Marketing to Hispanic, Black, and Asian Consumers
  • 8.5 Marketing to Sociodemographic Groups
  • 8.6 Ethical Issues in Diversity Marketing
  • 3 Unit Introduction
  • 9.1 Products, Services, and Experiences
  • 9.2 Product Items, Product Lines, and Product Mixes
  • 9.3 The Product Life Cycle
  • 9.4 Marketing Strategies at Each Stage of the Product Life Cycle
  • 9.5 Branding and Brand Development
  • 9.6 Forms of Brand Development, Brand Loyalty, and Brand Metrics
  • 9.7 Creating Value through Packaging and Labeling
  • 9.8 Environmental Concerns Regarding Packaging
  • 9.9 Ethical Issues in Packaging
  • 10.1 New Products from a Customer’s Perspective
  • 10.2 Stages of the New Product Development Process
  • 10.3 The Use of Metrics in Evaluating New Products
  • 10.4 Factors Contributing to the Success or Failure of New Products
  • 10.5 Stages in the Consumer Adoption Process for New Products
  • 10.6 Ethical Considerations in New Product Development
  • 11.1 Classification of Services
  • 11.2 The Service-Profit Chain Model and the Service Marketing Triangle
  • 11.3 The Gap Model of Service Quality
  • 11.4 Ethical Considerations in Providing Services
  • 12.1 Pricing and Its Role in the Marketing Mix
  • 12.2 The Five Critical Cs of Pricing
  • 12.3 The Five-Step Procedure for Establishing Pricing Policy
  • 12.4 Pricing Strategies for New Products
  • 12.5 Pricing Strategies and Tactics for Existing Products
  • 12.6 Ethical Considerations in Pricing
  • 13.1 The Promotion Mix and Its Elements
  • 13.2 The Communication Process
  • 13.3 Integrated Marketing Communications
  • 13.4 Steps in the IMC Planning Process
  • 13.5 Ethical Issues in Marketing Communication
  • 14.1 Advertising in the Promotion Mix
  • 14.2 Major Decisions in Developing an Advertising Plan
  • 14.3 The Use of Metrics to Measure Advertising Campaign Effectiveness
  • 14.4 Public Relations and Its Role in the Promotion Mix
  • 14.5 The Advantages and Disadvantages of Public Relations
  • 14.6 Ethical Concerns in Advertising and Public Relations
  • 15.1 Personal Selling and Its Role in the Promotion Mix
  • 15.2 Classifications of Salespeople Involved in Personal Selling
  • 15.3 Steps in the Personal Selling Process
  • 15.4 Management of the Sales Force
  • 15.5 Sales Promotion and Its Role in the Promotion Mix
  • 15.6 Main Types of Sales Promotion
  • 15.7 Ethical Issues in Personal Selling and Sales Promotion
  • 16.1 Traditional Direct Marketing
  • 16.2 Social Media and Mobile Marketing
  • 16.3 Metrics Used to Evaluate the Success of Online Marketing
  • 16.4 Ethical Issues in Digital Marketing and Social Media
  • 17.1 The Use and Value of Marketing Channels
  • 17.2 Types of Marketing Channels
  • 17.3 Factors Influencing Channel Choice
  • 17.4 Managing the Distribution Channel
  • 17.5 The Supply Chain and Its Functions
  • 17.6 Logistics and Its Functions
  • 17.7 Ethical Issues in Supply Chain Management
  • 18.1 Retailing and the Role of Retailers in the Distribution Channel
  • 18.2 Major Types of Retailers
  • 18.3 Retailing Strategy Decisions
  • 18.4 Recent Trends in Retailing
  • 18.5 Wholesaling
  • 18.6 Recent Trends in Wholesaling
  • 18.7 Ethical Issues in Retailing and Wholesaling
  • 19.1 Sustainable Marketing
  • 19.2 Traditional Marketing versus Sustainable Marketing
  • 19.3 The Benefits of Sustainable Marketing
  • 19.4 Sustainable Marketing Principles
  • 19.5 Purpose-Driven Marketing

Learning Outcomes

By the end of this section, you will be able to:

  • 1 Explain the role of marketing in the strategic planning process.
  • 2 Discuss the business portfolio and identify planning tools.
  • 3 Describe a SWOT analysis.
  • 4 List and describe marketing strategies based on analytics.

Explain the Role of Marketing in the Strategic Planning Process

To get a better idea of the importance of marketing in the strategic planning process, let’s imagine that you’re the owner of a manufacturing business that produces widgets. You’ve been able to recruit top engineering talent to design these widgets and source components from trusted, reliable vendors, and your manufacturing facility is efficient and can produce the widgets in a cost-effective manner. Sounds like a winning business, doesn’t it?

Well, the only thing we’ve left out of the equation for success is customers, and without customers, the finest engineering staff and manufacturing facility in the world won’t ring the bell in terms of profits or revenue. You need to determine who your customers are, what their needs and wants are, how you’re going to reach them, and how you’re going to persuade them to buy your widgets. That’s where marketing comes into the strategic planning process, and that’s why it plays a crucial role.

Marketing in the strategic planning process has several basic but critical functions:

  • First, marketers assist the strategic planning team in executing a marketing philosophy throughout the strategic planning process.
  • Second, marketers assist the organization in gathering and analyzing information necessary to examine the current situation (the first step in a gap analysis).
  • Third, marketers are responsible for the identification of trends in the marketing environment and assessing the potential impact of those trends. 24

Business Portfolio Definition

As noted above, many businesses have a single product or business unit. However, larger organizations such as Apple , Alphabet , General Electric , Meta , and Microsoft often have multiple diverse business units called strategic business units. Despite the fact that these SBUs report directly to the parent company’s headquarters, they typically develop their own vision statements, mission statements, objectives, and goals, and the strategic planning for these SBUs is performed separately and apart from other SBUs within the organization. 25 When companies have multiple products or business units, these comprise the business portfolio —the total group of product lines, services, and business units that the company possesses.

To give you a better sense of what a business portfolio entails, look at Figure 2.5 , which illustrates the products and services of Microsoft and how each offering contributes to the overall strategic plan of the company. 26 Microsoft reported $168 billion in revenue in fiscal year 2021, and each of its product lines (or strategic business units) contributes to this revenue in differing amounts. 27 It’s easy to see from this breakdown why each of these businesses under the Microsoft “umbrella” would have different strategic plans to execute within the markets they serve. You likely wouldn’t have one overarching marketing or business strategy for all of these SBUs because the markets for Office, Gaming, LinkedIn , and the other SBUs are likely very different and would require different strategies to reach and retain customers.

Analyze and Design the Business Portfolio

There are many reasons why an organization would establish separate business units or product lines as it grows. For example, if the current product line is in a market where growth is limited, it may choose to branch out to other product lines or markets. Alternatively, an organization may choose to expand into other product lines to take advantage of emerging opportunities.

Emerson Electric , headquartered in St. Louis, Missouri, has five business segments: Network Power, Process Management, Industrial Automation, Climate Technologies, and Commercial and Residential Solutions (i.e., tools and storage). These business segments provide products as diverse as hardware and software technologies; motors; fluid control systems; heating and air-conditioning products and services; and tools, storage products, and appliances for residential, health care, and food services. 28 When you consider divisions as diverse as these, it should be readily evident why each is a separate division with separate strategies to compete in its respective marketplaces.

Conversely, a business may choose to expand in areas in which it already has experience and can use the power of its core competencies to establish sustainable competitive advantage with new products in existing markets.

There are a few tools that can help determine which course of action is best advised given the current circumstances of the organization, the marketplace, and other factors. Let’s take a look at a few of them.

Boston Consulting Group (BCG) Matrix

The BCG matrix is a model developed by Boston Consulting Group that can be used to analyze a business’s product lines or SBUs and make decisions about which to invest in in the future and which they should try to minimize further investment in or even eliminate. The bottom line is that no business has unlimited funds to invest in its product lines, and the BCG matrix is a useful model in determining how to allocate money in terms of marketing, research and development (R&D), etc. to that portfolio.

As shown in Figure 2.6 , the BCG matrix considers both market share and market growth rate. The SBUs or products that have high market share in a high-growth market are called stars and are placed in the upper left quadrant. These are the opportunities that hold the most promise for the organization.

Conversely, those SBUs or products that have low market share in a low-growth market are referred to as dogs and are placed in the lower right quadrant. These are prime candidates for divestiture or elimination because they have relatively low growth potential, and although the business has significant funds tied up in them, they bring in virtually nothing in terms of revenues. Divestiture could also provide needed capital to invest in your stars or question marks.

Cash cows , in the lower left quadrant, are an interesting breed, so to speak. A cash cow is an SBU or product that has high market share in a low-growth market. They’re valuable to a business because they generate significant revenue that can fund other strategic initiatives or emerging opportunities. Incidentally, they’re called cash cows because the thinking is to “milk” these products for profits.

Those SBUs or products that have a low market share in a high-growth market are called question marks (sometimes also called “problem children”) and are placed in the upper left quadrant. Question marks are among the most complex decisions to be considered when developing a BCG matrix because a root cause analysis may be required in order to determine why these SBUs are, in fact, question marks. Obviously, with high-market growth, the market is strong, but there are one or more reasons why your organization hasn’t been able to capitalize on it and gain market share. Does the product line need more investment in order to move into the “star” category? Is competition so strong in this market that additional funding in terms of advertising campaigns or other marketing tactics render them useless? Is the question mark just a trend in which you can expect high growth without a lot of market share for a short period of time?

Once you have categorized each of your SBUs or products on the BCG matrix, you’ll have a crystal-clear vision of where each stands and can identify which you should prioritize and which need to be divested.

To better understand the BCG model, let’s do a simplified matrix for Apple and some of its products (see Figure 2.7 ). Because Apple has so many products and services, we’re showing only four hardware products in this matrix.

In this sample matrix, we’re going to place the Apple iPhone in the star category. You’ll recall from our discussion above that stars have relatively high market share in a growing market. Let’s face it: the iPhone is the shining gem of Apple’s portfolio. Even though Apple has diversified its product line, the iPhone is still responsible for 52 percent of the company’s revenue, raking in an astounding $192 billion in 2021. 29

Next, we’re going to put the iPad and the MacBook in the cash cow category. Remember that the BCG matrix is built on two parameters—market share and market growth. Both the iPad and the MacBook have relatively high market share compared to competitors, but the market for these products is not growing much anymore. 30 The Apple iPad had a 31.5 percent share of the global tablet market during the first quarter (down from 38 percent in the previous quarter), and the MacBook still holds popularity, garnering 15.3 percent of the market share. 31 Both the iPad and the MacBook are well-established products that continue to generate substantial income for Apple, and these products require relatively little additional investment for them to remain profitable.

Let’s move on to the question mark category. Remember that question marks have low market share in a high-growth market, and we’re going to place the Apple iWatch in this category. The iWatch has the potential to become as big of a hit as the iPhone, but the jury is still out because there are too many unknowns in the market. Global sales of smartwatches increased by 13 percent in the first quarter of 2022, and the Apple iWatch continues to lead in market share. 32 However, Apple will need to analyze its iWatch vis-à-vis its other products to decide if it should continue to invest in the product. 33

Finally, let’s move on to the dog quadrant of the matrix. We’re going to place the iPod in this category because market growth has slowed considerably as people use their phones to listen to music or podcasts. The iPod has experienced a shrinking market share as a result, and it wouldn’t make sense for Apple to continue to invest in the iPod. 34 As a matter of fact, Apple announced in May 2022 that it would discontinue the iPod Touch, while the touch-screen model launched in 2007 will remain on sale until supplies run out. 35

Link to Learning

Would you like to learn more about the BCG Matrix? Watch this brief video from Solve It Like a Marketer.

SWOT Analysis

SWOT is an acronym for a business’s strengths, weaknesses, opportunities, and threats, and it is a useful aid for zeroing in on a feasible marketing strategy. The purpose of a SWOT analysis is really quite simple. Marketers want to identify the strengths and weaknesses in the organization’s internal environment as well as the opportunities and threats that exist in the organization’s external environment. It is generally presented in the format seen in Figure 2.8 . You would complete the template with bullet points in each of the four quadrants.

A SWOT analysis will aid in taking advantages of the organization’s strengths and opportunities while avoiding (or at least minimizing) weaknesses and threats to its success. Realistically, some of the factors are in the control of the company (i.e., strengths and weaknesses), but other factors are outside the control of the company (i.e., opportunities and threats). Let’s consider each of these in a little more detail.

Strengths can be factors such as patents or trademarks possessed by the company that hinder competitors in participating in the market; a better cost structure than competitors; a talented, innovative staff; or strong brand recognition in the market. Strengths are internal to the organization, and they’re also positives. Questions to ask when developing this section may be: What do you do well? What unique resources you can draw on? Consider a company like Starbucks . If you were preparing a SWOT analysis for Starbucks, its strengths might include a strong brand image, solid financial performance, impressive growth in the number of stores, and an extensive international supply chain. 36

Weaknesses are also factors within a company’s internal environment, but these are hindrances to your success, so they’re categorized as negatives. Weaknesses may be difficulty in accessing capital or funding, outdated technology, an unmotivated workforce, weak brand recognition, or high levels of debt. Let’s go back to Starbucks. If you were preparing a SWOT analysis for Starbucks, some of its weaknesses may be high prices versus the competition and the imitability of its products. 37

Now we’ll switch over to external factors that affect the business. Opportunities are openings for something positive to happen if (and only if) you can capitalize on them. Opportunities can be moving into a new market segment that offers improved profits (like a snack food manufacturer moving into the health foods sector), competitors that have quality or delivery problems, or impending legislation that would favorably affect your organization if you’re able to capitalize on it. Once again, let’s go back to Starbucks. If you were preparing a SWOT analysis for Starbucks, some of its opportunities might be expansion in developing markets, a coffee subscription service similar to that offered by Panera Bread , and the introduction of new products and holiday flavors. 38

Finally, threats are anything external to your organization that can negatively impact your business. These may include supply chain problems, ongoing staffing problems, new competitors entering the market, or impending legislation that would negatively impact your organization, like tariffs. If you were doing a SWOT analysis for Starbucks, you might identify threats such as competition with lower-cost coffee sellers, tightening discretionary spending due to inflation, or the rising price of coffee beans. 39

Check out this video for a very simple example of a SWOT analysis.

When preparing a SWOT analysis, it is also helpful to compare elements by ranking strengths and weaknesses (internal factors) in terms of relative competitive importance. Marketers can also rank threats and opportunities (external factors) in terms of their likelihood and magnitude. 40

Earlier in this chapter, we pointed out the differences between corporate-level strategy, business-level strategy, and functional strategy. If you’re a fan of movies like Other People’s Money or Wall Street , you might think that corporate strategy focuses on hostile takeovers, mergers, and ruthless acquisitions.

The movie Moneyball is about a baseball general manager assembling a team by using computer analysis to hire new players. This is a great example of using analytics to inform strategy. Watch a clip of the movie here, where you see the analytics applied.

Market Penetration

When a company focuses on growing its market share in its existing markets, it is using what’s known as a market penetration strategy . This approach generally entails significant expenditures in advertising and other marketing efforts in order to influence consumers’ brand choice and create a brand reputation for the company, thereby increasing its market share.

In some mature industries (like soap, laundry detergent, or toothpaste), a market penetration strategy becomes a way of life because nearly all competitors are also engaged in intensive advertising and battle for market share. It becomes a way of life because companies fear that if they don’t advertise as much as or more than their competitors, they will lose market share.

To give you an idea of how fierce the competition is with a market penetration strategy, consider Procter & Gamble , which spent $4.7 billion on advertising in 2020. 41

Product Development

As noted above, a market penetration strategy focuses on existing products and existing markets. By contrast, a product development strategy involves the creation of new or improved products in order to drive growth in sales, revenue, and profit. Although the advertising expenditures involved with a market penetration strategy may be significant, they often pale compared to the expenditures involved in a product development strategy. This is because product development generally requires significant investment in R&D activities. 42

The automobile industry provides a good illustration of the product development strategy. Car makers generally refresh their models every few years to encourage car owners to trade in their old vehicles and buy the redesigned cars with the latest tech features such as driver assist, Wi-Fi hotspots, and Apple CarPlay and Android Auto. 43 At the same time, all the manufacturers are spending billions of dollars developing new electric vehicle models to meet ambitious goals for phasing out gasoline-powered engines.

Another great example of a product development strategy is Tide laundry detergent. Tide has undergone more than 50 formulation changes over the past 40 years in an effort to continually improve its product’s performance. The name always stays the same, but Tide has a “new and improved” formula with each new product release. 44

If you doubt the power of a product development strategy, the next time you go to the grocery store or supermarket, just look at how many “new and improved” products are on the shelves!

Market Development

A market development strategy involves searching for new market segments and uses for a company’s products. This strategy can involve the launch of its existing products into new markets or different geographical areas. In doing so, the company attempts to capitalize on the strength of the brand name it has developed in the existing markets and find new markets in which to compete.

Facebook is a great example of a market development strategy. It’s difficult to remember when Facebook wasn’t a household word, but Facebook started out as a small platform that enabled Harvard University students to compare headshots. The popularity of the platform spread to other college campuses, and eventually Facebook allowed nonstudents to join. It looks like the strategy worked—Facebook is now the largest social network in the world, with nearly 3 billion users! 45

To help you better understand these strategies, let’s consider each one from the perspective of one company— Harley-Davidson . If Harley-Davidson were to adopt a market penetration strategy, the company would focus on selling more Harley-Davidson motorcycles in the US market. If the company were to adopt a product development strategy, it would begin selling a new product such as biker clothing for children under the Harley-Davidson brand in the US market. Harley-Davidson is currently pursuing a market development strategy, with plans to develop a new motorcycle to manufacture and sell in China. Harley-Davidson’s diversification strategy might entail selling new products like children’s biker clothing in China for the first time.

Product Diversification

A product diversification strategy is still another tool that companies can use to improve profitability and increase sales of new products. This strategy can be utilized at both the business level and the corporate level. At the business level, marketers would expand into a new segment of an industry in which the company is already operating. 46 For example, consider Apple . The company launched its revolutionary iPhone in 2007, but it didn’t stop there. It has since diversified into tablets and other technology-related products. 47 At the corporate level, let’s consider a dine-in restaurant that adds corporate catering and perhaps a fleet of food trucks—both businesses outside the scope of its existing business.

There are three types of diversification techniques, as shown in Figure 2.9 .

Let’s look at each of these strategies in a little more detail.

The concept of concentric diversification revolves around the addition of similar products or services to an existing business. 48 If a picture is worth a thousand words, then an example has to be worth even more, particularly an example to which you can easily relate as a student. As you’re reading this chapter, consider book publishers, like Harper Collins , Simon & Schuster , or Penguin/Random House . These book publishers don’t only print the works of one author; rather, they have hundreds or perhaps thousands of authors’ works in their arsenals. These publishers will publish print books, e-books (like the one you’re reading right now), and audiobooks and may even sell the rights to some of the books for film and TV adaptations, allowing them to garner additional streams of revenue for one product. 49

Conversely, the concept of horizontal diversification involves making available to existing customers new and perhaps even unrelated products or services so that you can garner a larger customer base. 50 For example, consider a company that produces dental hygiene products like toothbrushes and dental floss. In order to increase sales to existing customers, the company may decide to introduce into the market a line of oral irrigators or teeth whiteners. These products are new to the company, but they still serve the same customer base as its existing products.

Finally, conglomerate diversification takes horizontal diversification one step further. Conglomerate diversification involves the development and addition of new products or services that are significantly unrelated. You’re not only introducing a new product, you’re introducing a new product that is completely unrelated to your existing line of business. 51 Consider General Electric when looking for an example of conglomerate diversification. General Electric started out as a lighting business, but over the years, it has diversified into medical devices, household appliances, aircraft engines, financial services, and more. That’s taking conglomerate diversification to a whole new level!

Blue Ocean Strategy

Learn about market-creating strategies known as the Blue Ocean strategy from Harvard Business Review , where it uses Cirque du Soleil as an example.

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

  • Opportunity
  • Market share and market growth rate
  • Market size and market share
  • The ratio of dogs to cash cows in the product portfolio
  • The potential for question marks to cross over and become stars
  • Question mark
  • Market development
  • Product diversification
  • Horizontal diversification
  • Product development

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Access for free at https://openstax.org/books/principles-marketing/pages/1-unit-introduction
  • Authors: Dr. Maria Gomez Albrecht, Dr. Mark Green, Linda Hoffman
  • Publisher/website: OpenStax
  • Book title: Principles of Marketing
  • Publication date: Jan 25, 2023
  • Location: Houston, Texas
  • Book URL: https://openstax.org/books/principles-marketing/pages/1-unit-introduction
  • Section URL: https://openstax.org/books/principles-marketing/pages/2-2-the-role-of-marketing-in-the-strategic-planning-process

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A 5-step strategic portfolio management process: a winning strategy to business success

Are you struggling to connect projects and programs with the strategic objectives of your organization? Don’t you have visibility on objectives, which limits your ability to undertake resource management or financial management efficiently? Effective project portfolio management is useless if it does not deliver business outcomes. And how to address it? By embracing Strategic Portfolio Management, the new PPM era.

In this post we explain the key components of the Strategic Portfolio Management process . Starting from the base, which is the definition of strategic objectives, we will unpack all the components of a process that will take your PPM to the next level.

TABLE OF CONTENTS

  • What is Strategic Portfolio Management: a brief introduction.
  • Step 1: Define your strategic objectives.
  • Step 2: Align investments and capacity when implementing the strategy.
  • Step 3: Get real-time visibility at portfolio level.
  • Step 4: Adopt Hybrid methodologies when delivering the work.
  • Step 5: Adaptive and ongoing management.
  • Conclusion: Strategic Portfolio Management, welcome to the new era of PPM.

What is Strategic Portfolio Management: a brief introduction

But before going deeper into this, let’s introduce the concept of Strategic Portfolio Management (SPM), and what are the main differences with Project Portfolio Management (PPM).

As Gartner explains, Strategic Portfolio Management (SPM) is “a set of business capabilities, processes and supporting portfolio management technologies” in order to create “a portfolio of strategic options that focus an organization’s finite resources” and with which to execute business strategy across the corporation.

One of the major challenges for organizations is to prioritize projects, products and programs according to their mission and strategic vision. And it is an issue mainly for two reasons:

  • Strategic objectives are not clear enough , either because they are not well defined or because they have not been communicated to all stakeholders involved in strategy execution.
  • There is no visibility over all the information artifacts and processes that make up project portfolio management. This can lead to information silos in relevant topics such as Capacity Planning, Financial Management or Risk Management. Silos that, if not eliminated, will cause your PPM efforts to fail to produce the expected business results.

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At the end of the day, Strategic Portfolio Management consists of implementing a series of processes and tools that will facilitate decision making in matters such as:

  • Prioritization or cancellation of projects based on whether or not they are aligned with the objectives.
  • Plan capacity and resource management more efficientl y, especially for those projects and programs that are of vital importance to the company.
  • Open or close the flow of investments in the organization’s portfolios based on their relevance to the business.

Strategic Portfolio Management vs Project Portfolio Management: what´s the difference?

Project Portfolio Management has always been linked to Project Management. In other words, PPM, over the last 25 years, has focused on completing projects within the agreed deadlines and budgets, always prioritizing those initiatives that deliver the highest value in the long term and in the shortest possible time.

Due to the proliferation of applications that were defined as PPM tools, the concept of Strategic Portfolio Management emerged. This is a term with which PPM market analysts recognize all those solutions that focus on enterprise-wide alignment and adaptation to strategic planning and execution.

Therefore, there are 3 main differences between Strategic Portfolio Management and Project Portfolio Management:

  • Continuous planning: Strategic Portfolio Management focuses on continuous planning and its monitoring. In this way, business outcomes can be linked to the different project portfolios of the organization in the medium and long term.
  • Business agility: the need to shorten time-to-market and maximize market opportunities makes it unfeasible a project portfolio management disconnected from the company’s mission and vision. Strategic Portfolio Management provides a 360º vision of strategic planning and execution and makes organizations more agile in prioritizing initiatives or adapting to changes in strategy.
  • Maximize capacity and resource usage: The Strategic Portfolio Management process provides organizations with the appropriate processes and tools to assess the priority of projects given their limited capacity and resources. It thus contributes to more efficient resource management and capacity planning.

Project Portfolio Management VS Strategic Portfolio Management

Designing a successful Strategic Portfolio Management process

This change of approach, however, is not easy and requires a detailed process. PMOs have to manage an increasing number of projects and programs with increasingly limited resources and capabilities. They also need to prove the value they bring to the corporation in the eyes of Executives and Senior Management. And, for this, the most effective way is to create a Strategic Portfolio Management process that links the different projects, programs and products to be managed with corporate objectives.

To this end, these are the 5 steps to design a Strategic Portfolio Management process that contributes to business success:

  • Define your strategic objectives.
  • Align investments and capacity when implementing the strategy.
  • Get real-time visibility at portfolio level.
  • Adopt Hybrid methodologies when delivering the work.
  • Adaptive and ongoing management.

We go into more detail on each of the steps of the process below.

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Step 1: Define your strategic objectives

To set the foundations of the process, it is essential to start with the basics: to define your strategic objectives. These objectives will ultimately guide the PMO in selecting and prioritizing the projects that will add the most value to the business.

Remember that it is very important to have traceability between the overall objectives of the organization and the project outcomes, as well as to efficiently communicate the strategy to all stakeholders involved in the strategy planning and execution. It is the only way to get the whole company on the same page.

A framework such as OKR can help you establish this connection between objectives, project portfolio prioritization and outcomes. It will help you to monitor in real time if you are achieving the expected results and to pivot or reprioritize your project portfolios according to changing business needs.

Step 2: Align investments and capacity when implementing the strategy

Once you draw up a roadmap in which you can visualize the objectives and how you will achieve them, you pave the way for better decision making in areas such as Budget Management, Capacity Planning or Resource Management.

By aligning investments with strategy execution, you are assured that the most relevant projects to your strategy will be properly financed. The same applies to Capacity Planning: your most valuable resources will be involved in the most important projects, while you detect resource constraints earlier.

Use criteria such as risk, ROI or strategy alignment to prioritize project portfolios

This will have a positive impact on project and product portfolios that are most relevant to the business, as blocking points and bottlenecks in resources or funds allocation will be reduced. However, this part of the process requires constant monitoring and review, so you should:

  • Centralize all your Demand Management processes to have complete visibility on all work to be delivered and to be able to select and prioritize initiatives in real time.
  • Review every 3 to 6 months the priority of deliverables: Organizational objectives change at a dizzying pace. This means that the priority of each project portfolio must be constantly reviewed to ensure that it remains aligned with objectives. And, consequently, capacity planning and budget management must also be reviewed from time to time to ensure that they remain aligned with the strategy.

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Step 3: Get real-time visibility at portfolio level

For a successful implementation of the Strategic Portfolio Management process, information silos must be broken down. Tools and processes must be established to ensure the traceability between objectives – portfolio prioritization – results.

Whether it is because project portfolios and strategic planning are still managed with spreadsheets , or because many PPM solutions have failed to adapt to the new reality of organizations, the fact is that many organizations today do not have the tools to connect strategy, execution and business benefits.

Now more than ever it is necessary to have a PPM software with SPM functionalities , as they will be your ally to face the challenges you will encounter when implementing the Strategic Portfolio Management process. For example:

  • Plan strategy and operations from one single place.
  • Allocate resources and funds according to objectives./li>
  • Prioritize the most profitable projects and initiatives for the business.
  • Break down informational silos.

Step 4: Adopt Hybrid methodologies when delivering the work

Related to the previous point, another weakness of most PPM software is that they are very rigid when it comes to pivoting between different Project Management methodologies. The objective of Strategic Portfolio Management is to accelerate the delivery of business value with whatever working methodology. Therefore, this process allows the use of agile, hybrid or waterfall methodologies .

This would mean selecting from a single PPM platform the work methodology that best suits each project according to the complexity, risks and resources needed to carry it out. For example, complex projects with a high level of uncertainty may benefit from an agile approach, while simpler projects may be better suited to a traditional approach.

Only a very few PPM tools have this flexibility to pivot from one methodology to another on the same platform. Having it would help to connect the work delivered with the business objectives, as well as help to accelerate the commercialization of our products and services, or to meet the expectations of customers and stakeholders.

Step 5: Adaptive and ongoing management

Last but not least, Strategic Portfolio Management is a process of continuous improvement. And even more so in this highly competitive environment, in which companies must be able to continually adapt to economic changes in order to be resilient and remain competitive in their markets.

This involves periodically reviewing the strategic planning (objectives, OKRs, decision-making criteria), as well as the performance and risks of each of the project portfolios . And, based on your analysis, optimize aspects such as Capacity Planning or Budget Management, as mentioned in point 2 above.

Adaptability. This is the key idea that you have to stick with. Adaptive Portfolio Management will give your organization the flexibility to address changes in strategy execution without compromising the performance and results of your project portfolios, and is a key element for efficient Strategic Portfolio Management.

Put in place performance metrics that measure progress toward strategic objectives

Conclusion: Strategic Portfolio Management, welcome to the new era of PPM

In conclusion, Strategic Portfolio Management has become an essential tool for companies looking to connect their strategy with execution. The 5 steps we have detailed in this article provide a clear and practical roadmap for designing and executing a successful Strategic Portfolio Management process.

It should be noted that, in order to implement this process, it is essential to have PPM tools with Strategic Portfolio Management capabilities. This will allow you to get a clear, real-time view of the strategy and all your project and product portfolios, helping companies to make informed decisions and align investment with strategic objectives.

If you want to learn more about Triskell’s Strategic Portfolio Management platform solutions , don’t hesitate to request a demo right now.

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Surely you have noticed that many companies offer more than just one product. For example, fast-moving consumer goods (FMCG) giant Procter & Gamble manages 65 brands organized into ten different product categories. 1 Although companies might start with only one product, as Procter & Gamble started by producing a simple soap, they typically expand and develop new ones over time. This expansion is known as their product or business portfolio. Let's take a look at this concept in more detail.

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Business Portfolio Definition

Usually, businesses produce and sell more than just one product or service. They offer several products or services that match the needs of different customers.

A business portfolio , or in other words, a product portfolio , is a collection of all the products or services offered by a business.

For instance, technology companies typically produce and sell more than just one product. For example, Samsung offers a range of products such as computers, laptops, TVs, printers, fridges, cookers, etc.

Business Portfolio Purpose

There are many reasons why a company might want to sell more than one product. Some of the main purposes of having a business portfolio are as follows:

Higher profits - Producing and selling more than one product can increase a company's profits. If there are more products, there will probably be more customers, and as a result, the company will sell more units.

Risk spread - When a firm produces and sells more than one product, the risk is automatically spread over all of its different products. The reason behind this is that if one of the products reaches its decline phase, there will still be other products on offer.

Different market segments - If a business offers a range of products, it can sell them to various market segments. People have different needs that are hard to satisfy with just one standardized product option.

Business Portfolio Analysis

When a business has a portfolio of products, it might face issues with its management . It might have a problem allocating investments (product development, promotion, etc.) across the portfolio and deciding what products to pay more attention to. Thus, managers must analyze the company's business portfolio in terms of how all the products are doing.

  • Product portfolio analysis refers to looking at a business's collection of products to assess which ones require more or less investment.

The Boston Matrix is a valuable method of analyzing a business's product portfolio.

The Boston Matrix is a model that helps businesses analyze their product portfolios. It is a tool that analyzes products regarding their market share and growth.

The Boston Matrix categorizes products into one of four areas (see Figure 1 below) based on:

Market share - does the product have a low or high market share?

Market growth - is demand for the product on the market low or high?

Market share is a percentage of total sales in a market that a business makes up. For example, if a company's market share is 40%, the company sells 40% of all the products in the market.

Business Portfolio Examples

The four types of product categories in the Boston Matrix are:

Question marks,

Let's now examine each product type's implications along with some business portfolio examples.

Product Portfolio: Stars

Stars are products that have a high market share and high market growth. These are products that are doing well in an attractive market. Stars present vast growth opportunities for the company and are worth investing in. However, attractive markets are very competitive; therefore, businesses need to invest heavily in stars to keep them in the market and turn them into cash cows in the future.

Netflix's streaming service dominates the global market for streaming services. However, since the market grows fast and there are many competitors, the company must invest to continuously improve its service.

Business Portfolio Photograph of a Netflix building at a sunset StudySmarter

Product Portfolio: Cash cows

Cash cows are products that have a high market share and low market growth. These products are doing well in a slowly growing market and provide a constant revenue stream. Cash cows require relatively little investment, but they still need to be managed to stay successful in the market.

Heinz baked beans dominate the market for baked beans. As they have a solid and stable position in a market that is not growing very fast, they do not require a significant investment. However, the product still has to be managed effectively.

Product Portfolio: Question marks

Question marks are products with low market share and high market growth. These are products that have the potential to grow in an attractive market. They require investment to beat the competition and gain market share. With significant investment, question marks may turn into stars. Therefore, it is up to the company to decide whether they wish to take that risk.

Just Eat's food order and delivery service has little market share but has the potential to grow in the highly competitive food delivery industry. However, to do so, it needs investment to beat its competitors, like Uber Eats and Deliveroo.

Product Portfolio: Dogs

Dogs are products that have a low market share and low market growth. These products are not doing very well in a slowly growing market. Dogs typically do not bring any profits and are not worth the investment. Their production is typically discontinued as the product is reaching the end of its life cycle.

Check out our product life cycle explanation to find out more about the stages a product passes through on the market.

Consider McDonald's. If the Apple Pie dessert has a low market share in a market that is not growing, it might not bring much profit to the company, and McDonald's would not expect it to do so in the future. Therefore the apple pie could eventually be discontinued.

Business Portfolio Photograph of a McDonalds at night StudySmarter

Business Portfolio Management

All companies want to have a portfolio of balanced products. Companies aim to have a mix of products that can bring various benefits. As a result, all businesses need to manage their portfolios.

Typically businesses aim to have stars, cash cows, and question marks. The only products they do not want are dogs, which do not bring much profit and are not expected to do so in the future.

Cash cows seem to be the most deserved products. They bring profit and do not require much investment to keep them in the market. However, having too many cash cows can also be a problem.

If a business has cash cows only, it does not have any products in markets that are growing. For example, although stars require high investment, they bring high profits and have the potential to create high returns on investment. Stars might, therefore, provide value to a company.

Question marks are also products a firm can benefit from having. Even though they typically do not bring profits, they can be invested in, resulting in high returns in the future.

Apple has a balanced product portfolio. It has the most desired cash cows on the market, such as the MacBook and the iMac. It also has stars like the iPhone, iPad, and Apple Watch and question marks like Apple TV. However, it also has dogs, such as the iPod.

Benefits and risks of developing new products

Although developing new products may bring many benefits, many risks are also involved.

Developing new products is a massive opportunity for a business. It is an opportunity not only to increase profits but also to improve competitiveness. A company earns money enabling further development if a new product is successful.

Moreover, when a product is successful, it means that it has brought customers' attention and strengthened a brand name. These factors make a company stand out from the competition and improve its competitiveness.

Unfortunately, developing new products is also risky, as it requires investment, and if a new product is not successful, it might make a firm lose a lot of money. This is particularly important as products with the most significant potential, and highest returns typically require the largest investments .

Further, an unsuccessful product can deteriorate the image of a company. A big failure may ruin a firm's reputation for a long time, which can be tough to repair.

Most businesses have a complete portfolio of products. Some of these products are more successful, bringing large profits, while some may be unsuccessful and not bring any profits at all. Nevertheless, a balanced portfolio typically consists of various products that complement one another.

Business Portfolio - Key takeaways

  • A product portfolio is a collection of all the products or services a business offers.
  • The benefits of having a portfolio of products are high profits, risk spread, and exposure to different market segments.
  • The Boston Matrix is a model that helps businesses analyze their product portfolios. t is a tool that analyzes products regarding their market share and growth.
  • The four product categories in the Boston Matrix are stars, cash cows, question marks, and dogs.
  • Although stars might be the most desired product type, companies should aim to have a balanced portfolio, as stars require significant investment.
  • Procter & Gamble. BUILD BRANDS THAT ARE MORE THAN JUST BRANDS. 2022. https://www.pgcareers.com/about-us

Frequently Asked Questions about Business Portfolio

--> what is a business portfolio.

A business portfolio, or in other words, a product portfolio, is a collection of all the products or services offered by a business.

--> What should a business portfolio include?

A business portfolio should include an overview of all the products or services offered by a company. The company should regularly conduct a product portfolio analysis to assess which products require more or less investnment.

--> What are the benefits of business portfolio?

The benefits of having a business portfolio include higher profits, risk spread, and the ability to reach various market segments.

--> What is a product portfolio strategy?

A product portfolio strategy involves analyzing the business's product offering. After the analysis has been conducted, the business can come up with a strategy that defines which products require more or less investment.

--> What is the importance of a product portfolio?

There are many reasons why a company might want to sell more than one product. The importance of a product portfolio for a business includes its ability to generate higher profits, spread risk, and engage various customer segments. 

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What is a product portfolio?

A product portfolio is a collection of all the products or services offered by a business.

What are the benefits of having a product portfolio?

  • high profits 
  • risk spread 
  • different market segments

What is meant by risk spread?

When a firm produces and sells more than one product, the risk is automatically spread over all of the products. This is because if the production of one product is declined, there will still be other products in the offer.

What is a product portfolio analysis?

Product portfolio analysis refers to looking at a business’s collection of products in order to decide what to do next.

What is the Boston Matrix?

The Boston Matrix is a model that helps businesses analyse their product portfolio. It is a method that analyses products in terms of their market share and market growth.

What are the two dimensions of the Boston Matrix?

  • Market share 

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Thinking strategically

In the late 1970s, Fred Gluck led an effort to revitalize McKinsey’s thinking on strategy while, in parallel, Tom Peters and Robert Waterman were leading a similar effort to reinvent the Firm’s thinking on organization. The first published product of Gluck’s strategy initiative was a 1978 staff paper, "The evolution of strategic management."

The ostensible purpose of Gluck’s article was to throw light on the then-popular but ill-defined term "strategic management," using data from a recent McKinsey study of formal strategic planning in corporations. The authors concluded that such planning routinely evolves through four distinct phases of development, rising in sophistication from simple year-to-year budgeting to strategic management, in which strategic planning and everyday management are inextricably intertwined.

But the power of the article comes from the authors’ insights into the true nature of strategy and what constitutes high-quality strategic thinking. The article is also noteworthy for setting forth McKinsey’s original definition of strategy as "an integrated set of actions designed to create a sustainable advantage over competitors" and includes a description of the well-known "nine-box" matrix that formed the basis of McKinsey’s approach to business portfolio analysis.

Ten years later, a team from the Firm’s Australian office took portfolio analysis a step further. Rather than basing portfolio strategy only on metrics of a business unit’s absolute attractiveness, as suggested by the nine-box matrix, John Stuckey and Ken McLeod recommended adding a key new decision variable: how well-suited is the parent company to run the business unit as compared with other possible owners? If the parent is best suited to extract value from a unit, it often makes no sense to sell, even if that unit doesn’t compete in a particularly profitable industry. Conversely, if a parent company determines that it is not the best possible owner of a business unit, the parent maximizes value by selling it to the most appropriate owner, even if the unit happens to be in a business that is fundamentally attractive. In short, the "market-activated corporate strategy framework" prompts managers to view their portfolios with an investor’s value-maximizing eye.

The evolution of strategic management

Frederick W. Gluck, Stephen P. Kaufman, and A. Steven Walleck

A minor but pervasive frustration that seems to be unique to management as a profession is the rapid obsolescence of its jargon. As soon as a new management concept emerges, it becomes popularized as a buzzword, generalized, overused, and misused until its underlying substance has been blunted past recognition. The same fate could easily befall one of the brightest new concepts to come along lately: strategic management.

In seeking to understand what strategic management is, we have conducted a major study of the planning systems at large corporations. This study is unique in that it attempts to pass judgment on the quality of the business plans produced rather than only on the planning process.

We found that planning routinely progresses through four discrete phases of development. The first phase, financial planning, is the most basic and can be found at all companies. It is simply the process of setting annual budgets and using them to monitor progress. As financial planners extend their time horizons beyond the current year, they often cross into forecast-based planning, which is the second phase. A few companies have advanced beyond forecast-based planning by entering the third phase, which entails a profound leap forward in the effectiveness of strategic planning. We call this phase externally oriented planning, since it derives many of its advantages from more thorough and creative analyses of market trends, customers, and the competition. Only phase four—which is really a systematic, company-wide embodiment of externally oriented planning—earns the appellation strategic management, and its practitioners are very few indeed.

It doesn’t appear possible to skip a step in the process, because at each phase a company adopts attitudes and gains capabilities needed in the phases to come. Many companies have enjoyed considerable success without advancing beyond the rudimentary levels of strategic development. Some large, successful enterprises, for instance, are still firmly embedded in the forecast-based planning phase. You might well ask, are these companies somehow slipping behind, or are they simply responding appropriately to an environment that changes more slowly? The answer must be determined on a case-by-case basis.

Phase one: Financial planning

Financial planning, as we have said, is nothing more than the familiar annual budgeting process. Managers forecast revenue, costs, and capital needs a year in advance and use these numbers to benchmark performance. In well over half of the companies McKinsey studied—including some highly successful ones—formal planning was still at this most basic phase.

Note the word formal. Many firms that lack a sophisticated formal planning process make up for it with an informal "implicit strategy" worked out by the chief executive officer and a few top managers. Formal strategic planning, in fact, is just one of the possible sources of sound strategy development. There are at least two others: strategic thinking and opportunistic strategic decision making (Exhibit 1). All three routes can result in an effective strategy, which we define as "an integrated set of actions designed to create a sustainable advantage over competitors."

Phase-one companies, then, do have strategies, even though such companies often lack a formal system for planning them. The quality of the strategy of such a company depends largely on the entrepreneurial vigor of its CEO and other top executives. Do they have a good feel for the competition? Do they know their own cost structures? If the answer to such questions is yes, there may be little advantage to formal strategic planning. Ad-hoc studies by task forces and systematic communication of the essence of the strategy to those who need to know may suffice.

Phase two: Forecast-based planning

Still, most large enterprises are too complex to be managed with only an implicit strategy. Companies usually learn the shortcomings of phase-one planning as their treasurers struggle to estimate capital needs and make trade-offs among various financing plans, based on no more than a one-year budget. Ultimately, the burden becomes unbearable, and the company evolves toward phase two. At first, phase-two planning differs little from annual budgeting except that it covers a longer period of time. Very soon, however, planners become frustrated because the real world does not behave as their extrapolations predict. Their first response is usually to develop more sophisticated forecasting tools: trend analysis, regression models, and, finally, simulation models.

This initial response brings some improvement, but sooner or later all extrapolative models fail. At this point, a creative spark stirs the imaginations of the planners. They suddenly realize that their responsibility is not to chart the future—which is, in fact, impossible—but, rather, to lay out for managers the key issues facing the company. We call this spark "issue orientation."

The tough strategic issue that most often triggers the move to issue orientation is the problem of resource allocation: how to set up a flow of capital and other resources among the business units of a diversified company. The technique most commonly applied to this problem is portfolio analysis, a means of depicting a diversified company’s business units in a way that suggests which units should be kept and which sold off and how financial resources should be allocated among them. McKinsey’s standard portfolio analysis tool is the nine-box matrix (Exhibit 2), in which each business unit is plotted along two dimensions: the attractiveness of the relevant industry and the unit’s competitive strength within that industry. Units below the diagonal of the matrix are sold, liquidated, or run purely for cash, and they are allowed to consume little in the way of new capital. Those on the diagonal—marked "Selectivity, earnings"—can be candidates for selective investment. And business units above the diagonal, as the label suggests, should pursue strategies of either selective or aggressive investment and growth.

Phase three: Externally oriented planning

Once planners see their main role as identifying issues, they shift their attention from the details of their companies’ activities to the outside world, where the most profound issues reside. The planners’ in-depth analyses, previously reserved for inwardly focused financial projections, are now turned outward, to customers, potential customers, competitors, suppliers, and others. This outward focus is the chief characteristic of phase three: externally oriented planning.

The process can be time-consuming and rigorous—scrutinizing the outside world is a much larger undertaking than studying the operations of a single company—but it can also pay off dramatically. Take the example of a heavy-equipment maker that spent nine person-months reverse engineering its competitor’s product, reconstructing that competitor’s manufacturing facilities on paper, and estimating its production costs. The result: the company decided that no achievable level of cost reduction could meet the competition and that it therefore made no sense to seek a competitive advantage on price.

Phase-three plans can sometimes achieve this kind of dramatic impact because they are very different from the kind of static, deterministic, sterile plans that result from phase-two efforts. In particular, they share the following features:

Phase-three resource allocation is dynamic rather than static. The planner looks for opportunities to "shift the dot" of a business into a more attractive region of the portfolio matrix. This can be done by creating new capabilities that will help the company meet the most important prerequisite for success within a market, by redefining the market itself, or by changing the customers’ buying criteria to correspond to the company’s strengths.

Phase-three plans are adaptive rather than deterministic. They do not work from a standard strategy, such as "invest for growth." Instead, they continually aim to uncover new ways of defining and satisfying customer needs, new ways of competing more effectively, and new products or services.

Phase-three strategies are often surprise strategies. The competition often does not even recognize them as a threat until after they have taken effect.

Phase-three plans often recommend not one course of action but several, acknowledging the trade-offs among them. This multitude of possibilities is precisely what makes phase three very uncomfortable for top managers. As in-depth dynamic planning spreads through the organization, top managers realize that they cannot control every important decision. Of course, lower-level staff members often make key decisions under phase-one and phase-two regimes, but because phase three makes this process explicit, it is more unsettling for top managers and spurs them to invest even more in the strategic-planning process.

Phase Four: Strategic management

When this investment is successful, the result is strategic management: the melding of strategic planning and everyday management into a single, seamless process. In phase four, it is not that planning techniques have become more sophisticated than they were in phase three but that they have become inseparable from the process of management itself. No longer is planning a yearly, or even quarterly, activity. Instead, it is woven into the fabric of operational decision making.

No more than a few of the world’s companies—mainly diversified multinationals that manufacture electrical and electronic products—have reached this fourth phase. Perhaps the need to plan for hundreds of fast-evolving businesses serving thousands of product markets in dozens of nations has accelerated evolution at these companies. Observing them can teach executives much about strategic management.

The key factor that distinguishes strategically managed companies from their counterparts in phase three is not the sophistication of their planning techniques but rather the care and thoroughness with which they link strategic planning to operational decision making. This often boils down to the following five attributes:

A well-understood conceptual framework that sorts out the many interrelated types of strategic issues. This framework is defined by tomorrow’s strategic issues rather than by today’s organizational structure. Strategic issues are hung on the framework like ornaments on a Christmas tree. Top management supervises the process and decides which issues it must address and which should be assigned to operating managers.

Strategic thinking capabilities that are widespread throughout the company, not limited to the top echelons.

A process for negotiating trade-offs among competing objectives that involves a series of feedback loops rather than a sequence of planning submissions. A well-conceived strategy plans for the resources required and, where resources are constrained, seeks alternatives.

A performance review system that focuses the attention of top managers on key problem and opportunity areas, without forcing those managers to struggle through an in-depth review of each business unit’s strategy every year.

A motivational system and management values that reward and promote the exercise of strategic thinking.

Although it is not possible to make everyone at a company into a brilliant strategic thinker, it is possible to achieve widespread recognition of what strategic thinking is. This understanding is based on some relatively simple rules.

Strategic thinking seeks hard, fact-based, logical information. Strategists are acutely uncomfortable with vague concepts like "synergy." They do not accept generalized theories of economic behavior but look for underlying market mechanisms and action plans that will accomplish the end they seek.

Strategic thinking questions everyone’s unquestioned assumptions. Most business executives, for example, regard government regulation as a bothersome interference in their affairs. But a few companies appear to have revised that assumption and may be trying to participate actively in the formation of regulatory policies to gain a competitive edge.

Strategic thinking is characterized by an all-pervasive unwillingness to expend resources. A strategist is always looking for opportunities to win at low or, better yet, no cost.

Strategic thinking is usually indirect and unexpected rather than head-on and predictable. Basil Henry Liddell Hart, probably the foremost thinker on military strategy in the 20th century, has written, "To move along the line of natural expectation consolidates the opponent’s balance and thus his resisting power." "In strategy," says Liddell Hart, "the longest way around is often the shortest way home." 1 1. See B. H. Liddell Hart, Strategy , second edition, Columbus, Ohio: Meridian Books, 1991.

It appears likely that strategic management will improve a company’s long-term business success. Top executives in strategically managed companies point with pride to many effective business strategies supported by coherent functional plans. In every case, they can identify individual successes that have repaid many times over the company’s increased investment in planning.

About the Authors

Frederick Gluck  was the managing director of McKinsey from 1988 to 1994;  Stephen Kaufman  and Steven Walleck  are alumni of McKinsey’s Cleveland office. This article is adapted from a McKinsey staff paper dated October 1978.

MACS: The market-activated corporate strategy framework

Ken McLeod and John Stuckey

McKinsey’s nine-box strategy matrix, prevalent in the 1970s, plotted the attractiveness of a given industry along one axis and the competitive position of a particular business unit in that industry along the other. Thus, the matrix could reduce the value-creation potential of a company’s many business units to a single, digestible chart.

However, the nine-box matrix applied only to product markets: those in which companies sell goods and services to customers. Because a comprehensive strategy must also help a parent company win in the market for corporate control—where business units themselves are bought, sold, spun off, and taken private—we have developed an analytical tool called the market-activated corporate strategy (MACS) framework.

MACS represents much of McKinsey’s most recent thinking in strategy and finance. Like the old nine-box matrix, MACS includes a measure of each business unit’s stand-alone value within the corporation, but it adds a measure of a business unit’s fitness for sale to other companies. This new measure is what makes MACS especially useful.

The key insight of MACS is that a corporation’s ability to extract value from a business unit relative to other potential owners should determine whether the corporation ought to hold onto the unit in question. In particular, this issue should not be decided by the value of the business unit viewed in isolation. Thus, decisions about whether to sell off a business unit may have less to do with how unattractive it really is (the main concern of the nine-box matrix) and more to do with whether a company is, for whatever reason, particularly well suited to run it.

In the MACS matrix, the axes from the old nine-box framework measuring the industry’s attractiveness and the business unit’s ability to compete have been collapsed into a single horizontal axis, representing a business unit’s potential for creating value as a stand-alone enterprise (Exhibit 3). The vertical axis in MACS represents a parent company’s ability, relative to other potential owners, to extract value from a business unit. And it is this second measure that makes MACS unique.

Managers can use MACS just as they used the nine-box tool, by representing each business unit as a bubble whose radius is proportional to the sales, the funds employed, or the value added by that unit. The resulting chart can be used to plan acquisitions or divestitures and to identify the sorts of institutional skill-building efforts that the parent corporation should be engaged in.

The horizontal dimension: The potential to create value

The horizontal dimension of a MACS matrix shows a business unit’s potential value as an optimally managed stand-alone enterprise. Sometimes, this measure can be qualitative. When precision is needed, though, you can calculate the maximum potential net present value (NPV) of the business unit and then scale that NPV by some factor—such as sales, value added, or funds employed—to make it comparable to the values of the other business units. If the business unit might be better run under different managers, its value is appraised as if they already do manage it, since the goal is to estimate optimal, not actual, value.

That optimal value depends on three basic factors:

Industry attractiveness is a function of the structure of an industry and the conduct of its players, both of which can be assessed using the structure-conduct-performance (SCP) model. Start by considering the external forces impinging on an industry, such as new technologies, government policies, and lifestyle changes. Then consider the industry’s structure, including the economics of supply, demand, and the industry chain. Finally, look at the conduct and the financial performance of the industry’s players. The feedback loops shown in Exhibit 4 interact over time to determine the attractiveness of the industry at any given moment. 

The position of your business unit within its industry depends on its ability to sustain higher prices or lower costs than the competition does. Assess this ability by considering the business unit as a value delivery system, where "value" means benefits to buyers minus price. 2 2. See Michael J. Lanning and Edward G. Michaels, 'A business is a value delivery system,' on page 53 of this anthology.

Chances to improve the attractiveness of the industry or the business unit’s competitive position within it come in two forms: opportunities to do a better job of managing internally and possible ways of shaping the structure of the industry or the conduct of its participants.

The vertical dimension: The ability to extract value

The vertical axis of the MACS matrix measures a corporation’s relative ability to extract value from each business unit in its portfolio. The parent can be classified as "in the pack," if it is no better suited than other companies to extract value from a particular business unit, or as a "natural owner," if it is uniquely suited for the job. The strength of this vertical dimension is that it makes explicit the true requirement for corporate performance: extracting more value from assets than anyone else can.

Many qualities can make a corporation the natural owner of a certain business unit. The parent corporation may be able to envision the future shape of the industry—and therefore to buy, sell, and manipulate assets in a way that anticipates a new equilibrium. It may excel at internal control: cutting costs, squeezing suppliers, and so on. It may have other businesses that can share resources with the new unit or transfer intermediate products or services to and from it. (In our experience, corporations tend to overvalue synergies that fall into this latter category. Believing that the internal transfer of goods and services is always a good thing, these companies never consider the advantages of arm’s-length market transactions.) Finally, there may be financial or technical factors that determine, to one extent or other, the natural owner of a business unit. These can include taxation, owners’ incentives, imperfect information, and differing valuation techniques.

Using the framework

Once a company’s business units have been located on the MACS matrix, the chart can be used to plan preliminary strategies for each of them. The main principle guiding this process should be the primary one behind MACS itself: the decision about whether a unit ought to be part of a company’s portfolio hangs more on that company’s relative ability to extract value from the unit than on its intrinsic value viewed in isolation.

The matrix itself can suggest some powerful strategic prescriptions—for example:

Divest structurally attractive businesses if they are worth more to someone else.

Retain structurally mediocre (or even poor) businesses if you can coax more value out of them than other owners could.

Give top priority to business units that lie toward the far left of the matrix—either by developing them internally if you are their natural owner or by selling them as soon as possible if someone else is.

Consider improving a business unit and selling it to its natural owner if you are well equipped to increase the value of the business unit through internal improvements but not in the best position to run it once it is in top shape.

Of course, the MACS matrix is just a snapshot. Sometimes, a parent company can change the way it extracts value, and in so doing it can become the natural owner of a business even if it wasn’t previously. But such a change will come at a cost to the parent and to other units in its portfolio. The manager’s objective is to find the combination of corporate capabilities and business units that provides the best overall scope for creating value.

MACS, a descendent of the old nine-box matrix, packages much of McKinsey’s thinking on strategy and finance. We have found that it serves well as a means of assessing strategy along the critical dimensions of value creation potential and relative ability to extract value.

Ken McLeod  is an alumnus of McKinsey’s Melbourne office, and  John Stuckey  is a director in the Sydney office. This article is adapted from a McKinsey staff paper dated July 1989. Copyright © 1989, 2000 McKinsey & Company. All rights reserved.

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BCG Matrix: Portfolio Analysis in Corporate Strategy

BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share matrix, the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to analyse business units or product lines based on two variables: relative market share and the market growth rate. By combining these two variables into a matrix, a corporation can plot their business units accordingly and determine where to allocate extra (financial) resources, where to cash out and where to divest. The main purpose of the BCG Matrix is therefore to make investment decisions on a corporate level. Depending on how well the unit and the industry is doing, four different category labels can be attributed to each unit: Dogs, Question Marks, Cash Cows and Stars. This article will cover each of these categories and how to properly use the BCG Matrix yourself.

Figure 1: BCG Matrix

BCG Matrix Example: Samsung’s Product Portfolio

Samsung is a conglomerate consisting of multiple strategic business units (SBUs) with a diverse set of products. Samsung sells phones, cameras, TVs, microwaves, refrigerators, laundry machines, and even chemicals and insurances. This is a smart corporate strategy to have because it spreads risk among a large variety of business units. In case something might happen to the camera industry for instance, Samsung is still likely to have positive cash flows from other business units in other product categories. This helps Samsung to cope with the financial setback elsewhere. However even in a well balanced product portfolio, corporate strategists will have to make decisions on allocating money to and distributing money across all of those business units. Where do you put most of the money and where should you perhaps divest? The BCG Matrix uses Relative Market Share and the Market Growth Rate to determine that.

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BCG Matrix Video Tutorial

Relative Market Share

The creator of the BCG Matrix used this variable to actually measure a company’s competitiveness . The exact measure for Relative Market Share is the focal company’s share relative to its largest competitor. So if Samsung has a 20 percent market share in the mobile phone industry and Apple (its largest competitor) has 60 percent so to speak, the ratio would be 1:3 (0.33) implying that Samsung has a relatively weak position. If Apple only had a share of 10 percent, the ratio would be 2:1 (2.0), implying that Samsung is in a relatively strong position, which might be reflected in above average profits and cash flows. The cut-off point here is 1.0, meaning that the focal company should at least have a similar market share as its largest competitor in order to have a high relative market share. The assumption in this framework is that an increase in relative market share will result in an increase in the generation of cash , since the focal company benefits from economies of scales and thus gains a cost advantage relative to its competitors.

Market Growth Rate

The second variable is the  Market Growth Rate , which is used to measure the market attractiveness . Rapidly growing markets are what organizations usually strive for, since they are promising for interesting returns on investments in the long term. The drawback however is that companies in growing markets are likely to be in need for investments in order to make growth possible. The investments are for example needed to fund marketing campaigns or to increase capacity. High or low growth rates can vary from industry to industry, but the cut-off point in general is usually chosen around 10 percent per annum. This means that if Samsung would be operating in an industry where the market is growing 12 percent a year on average, the market growth rate would be considered high.

Question Marks

Ventures or start-ups usually start off as Question Marks . Question Marks (or Problem Children) are businesses operating with a low market share in a high growth market. They have the potential to gain market share and become Stars (market leaders) eventually. If managed well, Question Marks will grow rapidly and thus consume a large amount of cash investments. If Question Marks do not succeed in becoming a market leader, they might degenerate into Dogs when market growth declines after years of cash consumption. Question marks must therefore be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

Stars  are business units with a high market share (potentially market leaders) in a fast-growing industry. Stars generate large amounts of cash due to their high relative market share but also require large investments to fight competitors and maintain their growth rate. Successfully diversified companies should always have some Stars in their portfolio in order to ensure future cash flows in the long term. Apart from the assurance that Stars give for the future, they are also very good to have for your corporate’s image.

Eventually after years of operating in the industry, market growth might decline and revenues stagnate. At this stage, your Stars are likely to transform into Cash Cows . Because they still have a large relative market share in a stagnating (mature) market, profits and cash flows are expected to be high. Because of the lower growth rate, investments needed should also be low.  Cash cows therefore typically generate cash in excess of the amount of cash needed to maintain the business. This ‘excess cash’ is supposed to be ‘milked’ from the Cash Cow for investments in other business units (Stars and Question Marks). Cash Cows ultimately bring balance and stability to a portfolio.

Business units in a slow-growth or declining market with a small relative market share are considered Dogs. These units typically break even (they neither create nor consume a large amount of cash) and generate barely enough cash to maintain the business’s market share. These businesses are therefore not so interesting for investors. Since there is still money involved in these business units that could be used in units with more potential, Dogs are likely to be divested or liquidated.

Figure 2: Cash Flows and Desired Movement in BCG Matrix

BCG Matrix and the Product Life Cycle

The BCG matrix has a strong connection with the Product Life Cycle . The Question Marks represent products or SBU’s that are in the introduction phase. This is when new products are being launched in the market. Stars are SBU’s or products in their growth phase. This is when sales are increasing at their fastest rate. Cash Cows are in the maturity phase: when sales are near their highest, but the rate of growth is slowing down due to saturation in the market. And Dogs are in the decline phase: the final stage of the cycle, when sales begin to fall.

Figure 3: BCG Matrix and Product Life Cycle

BCG Matrix In Sum

Taken all of these factors together, you can draw the ideal path to follow in the BCG Matrix, from start-up to market leader. Question Marks and Stars are supposed to be funded with investments generated by Cash Cows. And Dogs need to be divested or liquidated to free up cash with little potential and use it elsewhere. In the end, you will need a balanced portfolio of Question Marks, Stars and Cash Cows to assure positive cash flows in the future. If you want to know more about HOW to spend these investments in order to grow a business unit, you might want to read more about the Ansoff Matrix . Besides the BCG Matrix, there are other portfolio management frameworks you might want to have a look at such as the GE McKinsey Nine Box Matrix .

Further Reading:

  • Henderson, B. (1970). Growth-Share Matrix. BCG Perspectives.
  • https://www.bcgperspectives.com/content/articles/corporate_strategy_portfolio_management_strategic_planning_growth_share_matrix_bcg_classics_revisited/
  • https://www.bcg.com/publications/1970/strategy-the-product-portfolio.aspx

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10 thoughts on “ BCG Matrix: Portfolio Analysis in Corporate Strategy ”

Simple, easy to follow and moreover Clear and Perfect presentation Sir.

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Great videos, really helps

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This is a great video. Explained BCG matrix succinctly

Fantastic breakdown of the BCG matrix. greatly simplified!

What a powerful presantation of the BCG Matrix. You are simply the best.

Great website. It helps to add further clarity and more context to my textbook.

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Business Portfolio Analysis Matrix | Strategic Management

discuss strategic planning business portfolio analysis

Types of Matrix Used in Business Portfolio Analysis:- 1. BCG Growth-Share Matrix 2. GE Multifactor Portfolio Matrix 3. Hofer’s Product-Market Evolution Matrix 4. Market Life Cycle-Competitive Strength Matrix 5. Arthur D. Little Portfolio Matrix 6. Ansoff’s Product-Market Growth Matrix 7. Directional Policy Matrix. Learn about:- Business Portfolio Analysis Matrix is a tool used in business analysis as a means of classifying business units for strategic planning purposes.

Further this article will help you to learn about:-

  • Portfolio Analysis Example

Business Portfolio Analysis Matrix: BCG Matrix, Ansoff’s Matrix and Hofer’s Matrix

Matrix type # 1. bcg growth-share matrix :.

The BCG matrix is a chart that had been created by Bruce Henderson for Boston Consulting Group in 1970 to help corporations to analyze their business units or product lines. In general, for large companies, there is always a problem of allocating resources amongst its business units in some logical/rational ways. To overcome such problems, Boston Consulting Group (BCG) has developed a model, which has been termed as BCG matrix.

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BCG matrix is also called as ‘Growth-share matrix’, is based on two variables, viz., the rate of growth of the product-market and the market share in that market held by the firm relative to its competitors. This model aims at systematically identifying the main underlying strategic characteristics of specific business segments. This model is developed to analyze the problem of resource deployment among the business units or products of multi-business firms. BCG matrix is based on empirical research, which analyzes products and business by market share and market growth.

The Boston Consulting Group (BCG) has pursued and refined the concept of the experience curve to the point where this essentially production phenomenon has strong implications for marketing strategy. BCG matrix is considered to be an effective tool for strategy formulation. GSM matrix is said to be capable of assigning broad product-market strategies to products on the basis of the market growth rate and its market share relative to competitor’s product.

BCG matrix analysis helps the company to allocate resources and is used as an analytical tool in brand marketing, product management, strategic management and portfolio analysis. BCG matrix provides a scheme for classifying a company’s business according to their strategic needs. Specially cash or finance requirements.

By relating cash flow to market share and market growth, it could then determine those products that represent opportunities for investment, those that should generate investment funds, and those that drain funds and which should be liquidated or divested.

The underlying principle of BCG matrix is the net free cash flow of a company must be kept positive for a company’s growth to be financed through internal funds and its debt capacity. Company’s sustainable growth rate is then determined by the relative cash positions of its portfolio of business. There is a need to strike a balance between cash-generating business and cash-using business if growth is to be funded by the company.

BCG matrix is developed on the basis of two factors:

(a) Relative market share, and

(b) Business growth rate.

These two factors are used to plot all the business (products) in which the firm is involved. The vertical axis measure the annual growth rate of the market and the horizontal axis shows the relative market share of the firm. Each of these dimensions is divided into two categories of high and low, making up a matrix of four cells; and the products are graphed as Stars, Question Marks, Cash Cows and Dogs in these four cells.

High Growth-High Market Share- Stars :

Star represents those products, which have successfully passed the introduction stage and are on the path of growth. They are self sufficient for cash requirements i.e. cash generated is almost equal to cash used. Stars are the products that are rapidly growing with large market share. They earn high profits but they require substantial investment to maintain their dominant position in a growing market.

Stars are usually profitable and would be the future cash cows. Since the stars are growing rapidly and have the advantage of already having achieved a high share of the market, they provide the firms best profit and growth opportunities. Successful resource deployment beyond cash requirements could lead to a superior market share when industry growth potential falls off.

Resources should be allocated to these units to grow faster than the competition in sales and profits. Stars are leaders in the business and generate large amounts of cash. The stars will entail huge cash outflows to maintain the market share and to ward off competition. The firm will start feeling the experience curve effect.

Overtime, all growth slows. Therefore, stars eventually become cash cows if they hold their market share. If they fail to hold market share, they become dogs. Star is a market leader (i.e. high market share) in a high growth market. Stars are market leaders typically at the peak of their product life cycle and are usually able to generate enough cash to maintain their high share of the market.

When their market growth rate slows, stars become cash cows. The star generally pursues a growth strategy to establish a strong competitive position. Stars reinvest large amounts of revenues to further refine and improve the product.

Stars hold prices down to capture a larger share of the market and to discourage the entry of competitors. Since the stars are growing rapidly and have the advantage of already having achieved a high share of the market, they provide the firms best profit and growth opportunities.

Low Growth-High Market Share- Cash Cows :

A cash cow produces a lot of cash for the company. The company does not have to finance for capacity expansion as the market’s growth rate has slowed down. Since, a cash cow is a market leader; it enjoys economies of scale and higher profit margins. When a market’s annual growth rate falls, a star becomes a cash cow if it still has the largest relative market share.

The important strategic feature of cash cows is that they are generating high cash returns, which can be used to finance the stars or for use elsewhere in the business. Cash cows have a strong market position in the industry that have matured. In comparison with the position of the star performer, cash cows can expect little serious competition because of their relatively low expected industry growth rate.

Competitors will not expect to launch any offensive competitive strategy program in the absence of significant industry potential. Cash cows are units with high market share in a slow-growing industry. Cash cows are ideal for providing the funds needed to pay dividends and debts, recover overheads and supply of funds for investment in other growth areas. Cash cows are established, successful and need less investment to maintain their market share.

The cash cows are in the declining stage of their life cycle, the surplus cash generated by them will be invested in new question marks. Cash cows are more valuable in a portfolio because they can be ‘milked’ to provide cash for other riskier and struggling businesses. The strategy employed in respect of cash cows without having long-term prospects is to harvest i.e. to increase short-term cash flow without considering the long-term effects.

High Growth-Low Market Share- Question Marks :

The question mark is also called as ‘problem child’ or ‘wildcat’. Question marks are the products/businesses whose relative market share is low but have high growth potential. The area question mark identifies those products which are at introduction stage in the market and the cash generated is less than cash used for these products.

Their competitive position is weak but they work for long-term profit and growth. These products require additional funds to improve their market share so that the question mark becomes a star. This strategy may even necessitate foregoing short-term profits. If the firm is unsuccessful in uplifting a question mark to a position star, divestment strategy can be appropriate.

If no improvement is made in market share, question marks will absorb large amount of cash and later, as the growth stops, turn into dogs. If the question mark business becomes successful, it becomes a star. A question mark denotes a new entrant into the market and growth prospects will be tremendous but will have a very low market share and its success or failure cannot be judged easily.

If question marks are left unattended, they are capable of becoming cash traps. Question marks are yet to establish their competitive viability although they usually operate in a rapidly growing market. Therefore, they require huge cash outflow. Strategy must be evolved whether to try for a star or hold the current position or divest. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to achieve market share.

A decision needs to be taken about whether the product justifies considerable expenditure in the hope of increasing its market share, or whether it should be allowed to die quietly. Most businesses start off as a question mark in that the company tries to enter a high-growth market in which there is already a market leader. A question mark require a lot of cash for setting up additional plant and equipment and hire more personnel to keep up with the fast-growing market to overtake the market leader.

Low Growth-Low Market Share- Dogs :

Dogs describe company business that has weak market shares in low-growth markets. Products with low market share and limited growth potential are referred to as dogs. The prospects for such products are bleak. It is better to phase them out rather than continue with them. Dogs should be allowed to die or should be killed off. Although they will show only a modest net cash outflow or even a modest cash inflow, they are cash traps.

They provide a poor return on investment and not enough to achieve the organization’s target rate of return. These units are typically ‘break-even, generating barely enough cash to maintain the market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from financial point of view such a unit is worthless, not generating cash for the company.

They depress the company’s overall ‘return on assets ratio’, used by the investors, financial institutions and banks in judging how well the company is being managed. Since Dogs hold little promise for the future and may not even pay their own way, they are prime candidates for divestiture. The only way for dog is to increase its rate of sales growth by taking sales away from competitors.

Question marks unable to obtain a dominant market share by the time the industry growth rate inevitably slows become dog.

The feasible strategies are:

(a) Invest more money to see whether the market share can be increased.

(b) Harvest whatever can be extracted and then close down.

(c) Divest by selling or hiving off the business unit.

(d) Minimize the number of dogs in a company.

(e) As soon as they stop delivering, they should be phased-out or otherwise liquidated.

(f) Expensive turnaround plans should be avoided.

In some industries, dogs provide a platform for the development of future stars, act as loss leaders or help to complete a product range, to kill competition, for tax planning etc.

Other Classification of SBUs :

Infants – Products in an early stage of development.

Warhorse – Products that have been cash cows in the past and still making acceptable sales and profits even now.

Dodos – Products with low share, negative growth and negative cash flow.

Strategic Alternatives :

For a Strategic Business Unit (SBU), there are four strategic alternatives are suggested:

(a) Build – To increase the SBU’s market share, even foregoing short-term earnings to achieve this.

(b) Hold – To preserve the SBU’s market share.

(c) Harvest – To increase the SBU’s short-term cash flow regardless of the long-term effect.

(d) Divest – To sell or liquidate the business because resources can be better used elsewhere.

Problems in Using BCG Matrix :

The BCG matrix is criticized for the following reasons:

(a) It does not talk about profitability at all.

(b) It fails to correctly define market share and market growth.

(c) It ignores competition factors and trends in markets.

(d) It considers only two factors viz., market growth rate and market share, ignoring all other factors.

(e) It does not say how long a product will continue in each phase.

(f) It fails to consider globalization factor, where markets are not limited to a particular area or place.

(g) It encourages strategy development for general use rather than specific criteria.

(h) It implies assumptions about mechanism of corporate financing and market behaviour that are either unnecessary or false.

(i) It overlooks other important strategic factors that are a function of the external competitive environment.

(j) It does not provide direct assistance in company with different businesses in terms of investment opportunities.

(k) Its focus is on cash flow, whereas organizations may be more interested in ROI.

(l) It does not depict the position of business that are about to emerge as winner because the product is entering the takeoff stage,

(m) It neglects small competitors that have fast growing market shares.

(n) It fails to consider that, a business with a low market share can be profitable too.

(o) A high market share does not necessarily lead to profitability all the time.

(p) Market growth is not the only indicator for attractiveness of a market.

(q) It does not offer guidance for inter unit comparisons.

(r) An SBUs profitability, cash flow and industry attractiveness not always be closely related to market share and growth rate.

The BCG matrix cannot be used in isolation. It is a rough model, and the originators of the matrix modified it over time to include, for example, the concept of a ‘cash dog’ which has a low share of a low growth market but still earns a nice profit. The BCG matrix is not a tool for increasing profits. It is an analytical model suggesting guidelines for cross subsidization. BCG matrix does not talk about profits at all; it is useful in increasing cash flow situation.

The application BCG matrix to strategic decision making is in the manner of the diagnostic rather than a prescriptive aid. BCG model evaluates a firm’s products, business and/or profit centres as separate entities. Decisions are made for each entity pertaining to its market share and existing or potential growth rate of the industry.

The BCG matrix helps in forecasting cash flow situations. It also helps to make product mix decisions. An ideal business portfolio (mix of businesses) as envisaged by the BCG matrix would be one with largest number of cash cows and stars and only a few question marks and dogs. The matrix combines market growth rate and market share, and thus directly relates to the experience curve.

BCG matrix provides analysis in determining the competitive position and this can be translated into strategy. It helps the managers ‘balance the flow of cash resources among their various businesses. This sort of analysis enables a company to assess its competitive standing and enables to decide future resources allocation for its product portfolio.

Matrix Type # 2. GE Multifactor Portfolio Matrix :

This matrix is also called as ‘GEs Stoplight Matrix’ or ‘GE Nine-cell Matrix’ or ‘Industry Attractiveness – Business Strength Matrix or-‘GE Business Screen Matrix’ or ‘General Electric-Mckinsey Portfolio Matrix’ or ‘Business Planning Matrix’. This matrix was developed in 1970s by General Electric Company of US with the assistance of the Mckinsey consulting firm. This matrix helps in guiding resource allocation. This analysis is on the basis of two factors viz., business strength and industry attractiveness. This is developed in 3 x 3 grid as shown in figure 9.2.

discuss strategic planning business portfolio analysis

Portfolio Analysis in Strategic Management

What is portfolio analysis in strategic management.

Portfolio analysis in strategic management involves analyzing every aspect of product mix to identify and evaluate all products or service groups offered by the company on the market, to prepare the detailed strategies for each part of the product mix to improve the growth rate.

It can also be used to make a strategic decision about strategic business units. Portfolio analysis in strategic management has, as its major objective, the optimal gathering of the resources among the business activities comprising a diversified business portfolio.

What is the Portfolio Analysis?

Portfolio analysis is a process of examining all the aspects related to the organization to improve the organization’s profits.

Portfolio analysis aims to identify the components that need to be enhanced to remove barriers from making the working process recognize better methods to allocate resources to improve the return on investment(ROI).

Reasons For Portfolio Analysis

A different purpose for conducting a business portfolio analysis in strategic management. The three main reasons why management focuses on business portfolio analysis in strategic management, which are:

Reasons For Portfolio Analysis

1. Analysis

The organization’s first reason to conduct a portfolio analysis in strategic management is to determine every product mix’s current position and determine which SBUs (strategic business unit) need more or less investment. Management needs to create the organization’s entire portfolio to analyze the present opportunities and threats to the market and the product.

2. Formulate Growth Strategy

Another aspect that management wants to formulate from the portfolio analysis in strategic management is the growth strategy . According to other products and markets, they develop a different strategy according to their potential threats and opportunities. Portfolio analysis in strategic management helps in laying down the strategy of expansion as well

3. To Take Decisions Regarding Product Retention

Another reason for corporate portfolio analysis in strategic management is to determine the life of the product i:e, to determine which product should be retained longer and which product should be removed from the product line.

These are the three primary and basic reasons for the portfolio analysis in strategic management.

Business Portfolio Analysis 

Business Portfolio Analysis in strategic management gives importance to the development of strategies equal to the handling of investment portfolios. It is based on the theory of organisational strategy build-up techniques.

Business Portfolio analysis in strategic management shows systematic ways to interpret product and service that form a part of business portfolio analysis. The way in which the financial investments of the firms are treated likewise the appropriate organisational activities should be followed and the inappropriate ones should be disregarded.

Basically, business portfolio analysis forms a part of portfolio analysis in which the company emphasizes that the corporate strategies form a significant part of the decision making for the future accomplishment of the goals.

 Process For Portfolio Analysis in Strategic Management

Portfolio analysis in strategic management process in an organization is as follows:

Process For Portfolio Analysis in Strategic Management

Step 1: Identify Lines of Business

The first step of business portfolio analysis in strategic management is to identify all the current business lines and strategic business units.

Step 2: Group Lines of Business

An organization has three levels of business operation, which are:

  • broad membership – directly support the objectives in the strategic plan
  • support functions – deliver the core business benefits to members
  • money-makers – the source of revenues which support core businesses

Step 3: Compare Core Businesses with Mission 

After separating the activities, the next step in portfolio analysis in strategic management is to compare the core starts with vision and mission and defined goals and objectives. The business should directly support the statements. If the comparison differs, then companies should discontinue allocating the resources in that sector.

Step 4: Define Products in Each Line of Business

The next step of portfolio analysis in strategic management is to categorize each relevant product line I;e, subdivide, and define each product relevant product line.

Step 5: Apply the Program Evaluation Matrix

The Program Evaluation Matrix helps in determining the fundamental question of portfolio analysis in strategic management, which are:

  • Good fit with our other programs?
  • Easy to implement?
  • Low alternative coverage in the marketplace?
  • Is competitive position strong?

Step 6: Determine the Alternatives

At this stage, identification of alternatives is made i:e the competitors. Identification of similar products and their coverage area in the market. And the coverage is classified into:

  • Low coverage – few comparable programs offered elsewhere.
  • High coverage – many similar programs are offered elsewhere.

Step 7 Determine Program Fit

Ideally, the association will be segregated into two types of programs:

1. Well-fitting, accessible programs where the association has a strong position and competes aggressively for a dominant position.

2. Well-fitting, difficult programs with low coverage that the association has the unique, strong capability to provide to essential stakeholders.

This is the repeat process of portfolio analysis in strategic management which takes place in an organization.

Portfolio Management 

Portfolio Management explains a process in which individuals’ investments are managed in order to maximise their earnings given a definite time period. Also, it is kept in mind that the invested capital is not exposed to market risk after one limit.

Initially, portfolio management is a way out of SWOT ( strength, weakness, opportunity, threat) analysis of various investment avenues in comparison to investors’ risk appetite and goals. As a result, this helps the investors to earn and protect them from favourable risks.

Objectives of Portfolio Management

The objective of portfolio management is to select from different investment avenues that best suits the investor depending on various demographic factors like income, time period, age and risk.

  • Risk optimisation
  • Ensuring flexibility of portfolio
  • Allocating resources optimally
  • Maximising returns on investment
  • Capital appreciation
  • To improve the overall proficiency of the portfolio
  • Protecting earnings against market risks

Types of Portfolio Management 

Portfolio management can be broadly classified into 4 types which are as follows :

Types Of Portfolio Management

Active Portfolio Management 

This kind of portfolio management is typically aimed at maximising returns. The portfolio manager puts a significant amount of resources into the exchange of securities. Simply the portfolio manager purchases the stocks when undervalued and sells them on the increment of their value.

Passive Portfolio Management 

This type of portfolio management aims at fixed profile designs that are complementary to the current market trends. The portfolio manager here likes to invest in funds with a long run approach and low but steady returns.

Discretionary Portfolio Management 

This portfolio management is typically based on the authority of the portfolio manager and is entrusted to invest on the investor’s behalf. This should be kept in mind that the portfolio manager takes into consideration the risk appetite and goals of the investors and then makes the decision to choose the respective investment strategy whichever is suitable.

Non – Discretionary Portfolio Management 

This type is totally opposite of what has been studied in just above portfolio management. Here the portfolio manager just does the advisory part of investment choices. In this situation is it the choice of the investor whether to take it or reject it. Portfolio management in this case is a suggestion from financial experts to take an opinion from portfolio managers before disregarding them.

Methods for portfolio analysis In Strategic management

Methods of portfolio analysis are different as it depends upon the purpose and product. Here are different methods for portfolio analysis in strategic management:

Project Portfolio Management 

Project Portfolio Management is based on the forecasting technique of proposed or current projects. It is a source used by project management organisations and project managers to take into consideration or interpret the potential return occurring out of a project.

Project portfolio management aims at focussing on the right potential projects at the right time. They talk more about the delivery and execution of doing the projects right. The project portfolio management involves the analysis of every piece of data of the project which look forward to investing in newer projects.

Project Portfolio management enables different people to view the bigger picture :

  • Project managers 
  • Team managers 
  • Stakeholders 

Product Portfolio Strategy 

Product portfolio strategy refers to the list or series of all services and products which are offered by the company. Every business is different and therefore they all have individual ways to schedule their product template and product portfolio strategy. The process of product portfolio strategy involves a variety of decisions. 

The Role of Product Portfolio Strategy In Strategic Management

The role of product portfolio strategy is that every product or service whether tangible or intangible is unique and requires a special system. The products can include travel, differ in different situations or include services that need special attention while delivering. 

Products can be anything made for the target market and in return provides profits or benefits to the company, organisations, people or ideas etc.

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Business Portfolio Analysis | Meaning, Components, Types, Advantages & Disadvantages

Business Portfolio Analysis

What is Business Portfolio Analysis ?

Components of business portfolio analysis, types of business portfolio analysis.

Techniques of Business Portfolio Analysis

BCG Product-Portfolio Matrix / BCG  Matrix

Four cells of bcg matrix.

BCG Product-Portfolio Matrix

Merits of BCG Matrix

  • The BCG matrix adds value to portfolio analysis. 
  • The BCG matrix can be applied to large conglomerates that are interested in benefits from experience effects and volume. 
  • The BCG model can be easily understood and put into practice.
  • It helps in management decision-making. 
  • The model helps in comparing the growth of different businesses on the basis of industry average. It also helps in checking the portfolio for financial evaluation of the same.
  • The ideas behind the model truthful and easily applicable at business and corporate levels. 
  • The use of the experience curve helps the company to manufacture products that are priced low enough to get market leadership. On becoming a 'star' firm (as per the BCG matrix) the company certainly becomes profitable.
  • It is a good and useful guide to allocate the resources of the company for the company or competitors.
  • The BCG matrix simplifies business analysis by limiting to just two factors-market growth and relative market share from the variety of factors possible.
  • The BCG matrix helps to evaluate the firm's product portfolio in the four categories and helps in framing strategies for the same.

Demerits of BCG Matrix 

  • The BCG matrix over simplifies by categorizing businesses into high and low. However, businesses can vary in various degrees in between these two extreme measures. The two dimensional nature of the model thus does not capture all aspects of the business.
  • This matrix does not consider many other important aspects for portfolio analysis, such as competitive advantages, capital requirement, size of market, etc.
  • Some aspects of BCG matrix do not represent real situation. For example, the new firms that have low market share or growth are categorized 'dog' firms. However, the real picture entirely different. Sometimes, these new firms show a great potential for growth and capture the market.

Corporate Parenting Analysis 

  • What are the businesses that a diversified entity should get into and why ? 
  • What is the organisation structure, procedure, or management concepts that should exist so that the best results are obtained in the corporation's individual SBU ? 
  • Estimate each business on the basis of its critical success factors.
  • Identify the areas of where there is a scope for improvement in each business unit.
  • Scrutinize the strategic fit between the parent firm and its business units.

Parenting-Fit Matrix

Positions of Parenting-Fit Matrix

Ge 9 cell model.

GE 9 Cell Matrix

Differences Between GE 9 cell and BCG matrix

  • The GE model considers two basic factors, i.e., industry attractiveness and competitive position, which are further divided into three factors, instead of only two factors in BCG matrix, i.e., market. growth and market share, making it a simple model. 
  • The GE model analyses the variables at three levels, i.e., high, medium, and low, whereas the BCG model considers only two levels, i.e., high and low.

Zones of GE-9 Cell Model

Merits of ge-9 cell model .

  • GE-9 cell model offers a classification into medium and average ratings which the BCG matrix does not with the rather simplistic classification of high and low. 
  • It also considers many factors like market share, industry size, etc. 
  • It is also a very powerful strategic technique that channelizes corporate resources to businesses and categorizes them as per medium to high attractiveness and the medium to high business strength
  • It also utilizes many factors while framing the two variables of industry attractiveness and business strength.

Demerits of GE-9 Cell Model

  • It can become quite complex with increase in size of the business.
  • Industry attractiveness and business strengths are subjective variables and differ from person to person.
  • New business units in a developing industry cannot be analyzed through this model appropriately. 
  • It rather than specifying the business policies provides strategic prescriptions.

Advantages of Business Portfolio Analysis

Disadvantages of business portfolio analysis, you may like these posts.

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COMMENTS

  1. What Is Strategic Portfolio Management?

    Strategic portfolio management is the process an organization uses to select, prioritize, and control resources within its portfolio of programs, projects, and initiatives used to meet strategic goals and objectives.

  2. The Complete Guide to Strategy Portfolio Management

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  3. Strategic portfolio analysis

    Strategic portfolio analysis involves identification and evaluation of all products or service groups offered by company on the market (so called product mix) and preparing specific strategies for every group according to its relative market share and actual or projected sales growth rate.

  4. 2.5 Strategic Portfolio Planning Approaches

    A portfolio planning approach involves analyzing a firm's entire collection of businesses relative to one another. Two of the most widely used portfolio planning approaches include the Boston Consulting Group (BCG) matrix and the General Electric (GE) approach. The Boston Consulting Group Matrix Figure 2.16 The Boston Consulting Group (BCG) Matrix

  5. What is strategic planning? A 5-step guide

    A 5-step gu ... What is strategic planning? A 5-step guide Julia Martins January 23rd, 2024 11 min read Jump to section Summary Strategic planning is a process through which business leaders map out their vision for their organization's growth and how they're going to get there.

  6. BCG Matrix

    The BCG Matrix is one of the most popular portfolio analysis methods. It classifies a firm's product and/or services into a two-by-two matrix. Each quadrant is classified as low or high performance, depending on the relative market share and market growth rate. Learn more about strategy in CFI's Business Strategy Course.

  7. Strategic Analysis

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  8. What is Strategic Analysis? 8 Best Strategic Analysis Tools + Examples

    What Is Strategic Analysis? Strategic analysis is the process of researching and analyzing an organization along with the business environment in which it operates to formulate an effective strategy.This process of strategy analysis usually includes defining the internal and external environments, evaluating identified data, and utilizing strategic analysis tools.

  9. Portfolio Planning and Corporate-Level Strategy

    Portfolio planning is a process that helps executives assess their firms' prospects for success within each of its industries, offers suggestions about what to do within each industry, and provides ideas for how to allocate resources across industries.

  10. Portfolio Strategy

    Portfolio Strategy. We help clients improve performance by designing portfolios—supported by resource reallocation, integrated business-unit strategies, and planning processes—that position them for success. To build a balanced portfolio and reignite growth, companies must finely calibrate their current mix of assets, capabilities, and ...

  11. 2.2 Marketing's Role in the Strategic Planning Process: Portfolio Analysis

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  12. 2.2 The Role of Marketing in the Strategic Planning Process

    Learning Outcomes. By the end of this section, you will be able to: 1 Explain the role of marketing in the strategic planning process.; 2 Discuss the business portfolio and identify planning tools.; 3 Describe a SWOT analysis.; 4 List and describe marketing strategies based on analytics.; Explain the Role of Marketing in the Strategic Planning Process. To get a better idea of the importance of ...

  13. A 5-step strategic portfolio management process

    Step 1: Define your strategic objectives. Step 2: Align investments and capacity when implementing the strategy. Step 3: Get real-time visibility at portfolio level. Step 4: Adopt Hybrid methodologies when delivering the work. Step 5: Adaptive and ongoing management. Conclusion: Strategic Portfolio Management, welcome to the new era of PPM.

  14. Portfolio Analysis

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  15. Business Portfolio: Definition & Analysis

    A business portfolio, or in other words, a product portfolio, is a collection of all the products or services offered by a business. For instance, technology companies typically produce and sell more than just one product. For example, Samsung offers a range of products such as computers, laptops, TVs, printers, fridges, cookers, etc.

  16. Thinking strategically

    The first published product of Gluck's strategy initiative was a 1978 staff paper, "The evolution of strategic management." The ostensible purpose of Gluck's article was to throw light on the then-popular but ill-defined term "strategic management," using data from a recent McKinsey study of formal strategic planning in corporations.

  17. Strategic Portfolio Analysis of Business

    Strategic Portfolio Analysis, alternatively termed Business Portfolio planning or Portfolio strategy or Policy-Strategy Profile or Organisational Portfolio Plan, is a broad term and refers to a technique found in many different variations.

  18. How to use the BCG Matrix

    The Boston Consulting group's product portfolio matrix (BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue, or develop products. It's also known as the Growth/Share Matrix.

  19. GE McKinsey Matrix EXPLAINED with EXAMPLES

    The GE-McKinsey Matrix (a.k.a. GE Matrix, General Electric Matrix, Nine-box matrix) is just like the BCG Matrix a portfolio analysis tool used in corporate strategy to analyse strategic business units or product lines based on two variables: industry attractiveness and the competitive strength of a business unit.

  20. BCG Matrix EXPLAINED with EXAMPLES

    BCG Matrix (also known as the Boston Consulting Group analysis, the Growth-Share matrix, the Boston Box or Product Portfolio matrix) is a tool used in corporate strategy to analyse business units or product lines based on two variables: relative market share and the market growth rate.

  21. Business Portfolio Analysis Matrix

    Types of Matrix Used in Business Portfolio Analysis:- 1. BCG Growth-Share Matrix 2. GE Multifactor Portfolio Matrix 3. Hofer's Product-Market Evolution Matrix 4. Market Life Cycle-Competitive Strength Matrix 5. Arthur D. Little Portfolio Matrix 6. Ansoff's Product-Market Growth Matrix 7. Directional Policy Matrix.

  22. Portfolio Analysis in Strategic Management

    Portfolio analysis in strategic management involves analyzing every aspect of product mix to identify and evaluate all products or service groups offered by the company on the market, to prepare the detailed strategies for each part of the product mix to improve the growth rate.

  23. Business Portfolio Analysis

    BCG matrix provides the following benefits : The BCG matrix adds value to portfolio analysis. The BCG matrix can be applied to large conglomerates that are interested in benefits from experience effects and volume. The BCG model can be easily understood and put into practice. It helps in management decision-making.