What is Business Portfolio

A business portfolio normally includes the collection of businesses and products that constitute and make up a company. A business portfolio rightly describes a companys strength and helps the company to exploit the most attractive business opportunities.

The analysis of the business portfolio helps a company to decide to whether its businesses should receive more or less investment. Further the portfolio also helps to determine and develop growth strategies for introducing new products and earning new businesses. On the same time a portfolio also helps a company to decide upon whether it should or not retain certain products.

 

Planning a Business Portfolio

Creating or planning a business portfolio encompasses several attributes. It is a strategic and systematic process.

 

1. Identify Strategic Business Units (SBU):

The first step in planning is to identify various Strategic Business Units (SBU) in a company portfolio. SBU refers to that unit of a company that can be planned independently from other businesses and have a separate mission and objective. Normally a SBU can be a company division, a product line or even an individual brand. More or less it depends on the company nature and organization.

 

2. Market Attractiveness :

When planning a portfolio a company should try to understand and determine as to what is in the market that they can exploit. They need to understand to which market they should be attracted. There are various factors that make a certain industry attractive. A business portfolio should be planned only after analyzing these factors. Typical factors that affect the market attractiveness include:

• Market Size

• Market growth

• Market profitability

• Pricing trends

• Competition

• Overall risk of return on investment

• Segmentation

• Distribution structure

• Division of products and services

 

3. Competitive Strength :

The analysis of the competitive strength provides the company the dimensions of assessing the competitive position of each SBU. There are several factors that need to be evaluated for obtaining the competitive strength. The most important factor include:

• Competencies of the assets and their strength

• Relative strength of brands

• Customer royalty

• Comparison of cost structure with competitors i.e. relative cost position

• Distribution strength

• Records of innovations and new technologies

• Access to financial and other investment resources

 

Business Portfolio Management

The panning of the business portfolio further depends on many individuals and teams of the same company. In a big company these teams and individuals are often decentralized and have their own agenda. For proper business management of the business portfolio, heir knowledge, ambitions and decisions are aligned with the short term financial necessities of the company. On the same time these attributes are balanced against the long-term strategic goals of the company.

Several Business portfolio management software systems have been developed. They mainly focus on tracking and reporting internal operation measures, while the market and competitive intelligence are unsupported. The process of planning often is very complicated and intertwined thus it is implemented different levels of business portfolio management.

 

Product level Market Portfolio Management:

At this level the management process helps to produce hybrid decision support models, wherein the process combines the internal finances with external market focus. Reality-based score cards are prepared. The criteria include market attractiveness, product strength, strategic fit and risk. The score cards provide with an essential cross-check for financial projections and aspirations. Graphical portfolios are created which show the evolutions of the market over the time and help in developing alternative product market strategies that can be assessed and optimized.

 

Corporate Portfolio Management:

For a big organization SBUs operating in different markets can be compared objectively to the parameters of value creation potential, risk and fit and financials. The management systems help to highlight the implications and trade-offs of resource allocations choices. As a result the management system allows enhanced target setting and an appropriate portfolio and integration.

 

Industry and Competitor Portfolio Management (ICPM):

The management system enables to obtain a multi-layered interactive picture of all the main segments and of the industry. Further the system also reveals the key positions of all competitors. Based on the rigorous external analysis of market attractiveness profiles and critical success factor analysis the ICPM makes the competitors preemption more useful and also increases the levels on new business development and global category management capability.

 

Key features of the Software Solution

1. The business management solution enables portfolio visualization and animation.

2. It further enables multi-dimensional portfolio analysis.

3. The software offers a criteria-based decision support.

4. It helps to make predictive business models.

5. The software help for resource optimization

6. It also allows project tracking and workflow, thus enabling efficient document management.

 

Benefits of Business Portfolio Management

1. The management process helps greatly to reduce investments risk while maximizing the return and value of the investments.

2. A good planning enhances the communication and alignment between IS and business leaders.

3. Proper planning induces a team spirit and encourages the leaders to think of the team and become more responsible towards projects.

4. Proper planning allows planners to schedule resources more efficiently.

5. The planning process helps to identify the redundant projects and make it easier to kill projects.

 

Hurdles with Business Portfolio Management

As being a relatively new concept there are a few major hurdles that a company may come across when managing a business portfolio.

1. Till now single solution software has not been developed for portfolio. The solutions developed normally undertake a specific task of the management process.

2. In absence of proper document management system obtaining good information becomes very difficult. To react and mold according to the market promptly a proper database and information is a must.

3. Often it is difficult to decide as to which products should be removed for the final portfolio.

4. Planning a business portfolio is a time consuming process and coordination becomes difficult with busy executives. Time constraints are a major hurdle with management and planning.

Having a proper and accurate business portfolio is a critical part of any business development process and planning.