Portfolio-parenting - brief

Portfolio analysis

• Portfolio analysis
– How much time & money to
invest on best products & SBUs
– How much time & money for
developing new products
success?H
• BCG Matrix Stars LQuestion
Marks
Industry growth rate

Cash Cows Dogs

10X 5X 1X 0.1X L
H
Relative Market share
 Portfolio analysis

• GE business screen – nine cell model

– Long-term industry attractiveness
• Market growth rate
• Industry profitability
• Size and pricing practices
• Other opportunity & threats
– Business strength or competitive position
• Market share
• Technological position
• Profitability, size and other strength & weakness
 Portfolio analysis

– Select criteria to rate industry (industry attractiveness) for each product

line or business unit.
• very unattractive to very attractive (1-5)
– Select the key factors needed for success in each product line or
business unit.
– Assess business strength and competitive position for each product line.
• very weak to very strong.
– For each product plot current position in a matrix
– Plot the firm’s future portfolio, assuming that present corporate and
business strategies remain unchanged.
– Is there a performance gap between projected and desired portfolio?
 Portfolio analysis

• Advantage
– Evaluate each of the corporation’s business individually, set
objective and allocate resources
– Stimulates externally oriented data to supplement managements
decision
– Raises issues of cash flow availability for use in expansion
– Graphic depiction facilitates communication
 Portfolio analysis

• Limitations
– Not easy to define market segment
– Suggests standard strategies
• can miss opportunities or be impartial
– Illusion of scientific rigor when in reality positions are based on
subjective judgments
– Terms like cash flow, dogs are self fulfilling prophecies
– What makes an industry attractive? Shat stage the product is in
its life-cycle?
– Scope of naivety, unless used judiciously
 Corporate parenting

• Corporate parenting

– Which business should the company own and why?

– Which organizational structure, management processes and philosophy

will foster superior performance from the company’s business units?

– Views in terms of resources and capabilities that can be used to build

business unit value as well as generate synergies across business units

Thank You