Portfolio Strategy #1 – Introduction
Portfolio analyses are an important part of strategic marketing planning. By evaluating strategic business units (SBUs), you can decide how investments should be spread across the product and service portfolio – whether at manufacturing companies or service providers, in retail stores or in the sector of e-commerce.
Business units are mapped as product-market combinations into a matrix with the following dimensions:
- Internal factors that can be influenced actively by management (e.g. market share, relative competitive position, etc.)
- External factors that cannot be influenced actively (e.g. market volume, market growth, etc.).
Depending on the degree of precision or general level of ambition, the assessment of the business units can be based on intuition, plausibility considerations or empirical data. Certain strategies can then be derived from the actual situation of the business units.
Basically, portfolio representations can be created with different criteria or dimensions, as long as the basic structure of an external and an internal dimension is taken into account. Not only strategic business units, but also individual products or competitors, for example, can be classified and evaluated.
Important representatives of portfolio analysis are the Boston I Matrix (BCG portfolio) and the McKinsey Matrix, which resulted from the criticism of the BCG Matrix.
Portfolio Analyses in Practice
In practical terms, the external and internal dimensions are often evaluated on the basis of individual, emotional judgements. Basically, the evaluation should include as much empirical data as possible. It is also advisable to involve proven experts within the company and discuss the assessment principles and evaluations. In this way, different aspects and perspectives can be taken into account and reliable results can be found together.
Basically, a gradual weighting of individual criteria should also be considered in order to avoid overestimating unimportant factors and underestimating important factors.