Portfolio Analysis
The previous chapters dealt with strategy development for individual SBUs.
Different SBU strategies must ultimately be judged from the viewpoint of the total organization before being implemented. In today's environment, most companies operate with a variety of businesses. Even if a company is primarily involved in a single broad business area, it may actually be operating in multiple product/market segments. From a strategy angle, different products/markets may constitute different businesses of a company because they have different roles to play. This chapter is devoted to the analysis of the different businesses of an organization so that each may be assigned the unique role for which it is suited, thus maximizing long-term growth and earnings of the company.
Years ago, Peter Drucker suggested classifying products into six categories that reveal the potential for future sales growth: tomorrow's breadwinners, today's breadwinners, products capable of becoming net contributors if something drastic is done, yesterday's breadwinners, the "also rans," and the failures. Drucker's classification provides an interesting scheme for determining whether a company is developing enough new products to ensure future growth and profits.
In the past few years, the emphasis has shifted from product to business. Usually a company discovers that some of its business units are competitively well placed, whereas others are not. Because resources, particularly cash resources, are limited, not all SBUs can be treated alike. In this chapter, three different frameworks are presented to enable management to select the optimum combination of individual SBU strategies from a spectrum of possible alternatives and opportunities open to the company, still satisfying the resource limitations within which the company must operate. The frameworks may also be used at the SBU level to review the strategic perspective of its different product/market segments.
The first framework to be discussed, the product life cycle, is a tool many marketers have traditionally used to formulate marketing strategies for different products. The second framework was developed by the Boston Consulting Group and is commonly called the product portfolio approach. The third, the multifac-tor portfolio approach, owes its development to the General Electric Company. The chapter concludes with the Porter's generic strategies framework.
Continue reading here: Portfolio Analysis Conclusion
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