Business Portfolio Planning






                Business Portfolio Planning

Sometime a firm may manage more than one business. A collection of such businesses is known as the Business portfolio.
When managing a portfolio of businesses, management wants to know which business is more important and which is less important because of we must have to be invested in the most attractive businesses in order to get the highest outcome against the limited resources.

How to analyze what is the most attractive businesses?

There are two major evaluation models;
  1. Boston Consulting Group’s Model (BCG matrix)
  2. General Electric Model (GE Model)


1. Boston Consulting Group’s Model/ Growth-share matrix
      (BCG matrix)


The BCG matrix can be applied either to a product portfolio or a business portfolio.

Regarding business portfolio, to use the BCG matrix, it is necessary to be identified different Strategic Business Units in the firm.

“A distinct unit, division, product line or even a single product of the parent company with a specific market focus and a manager who has the authority and responsibility for integrating all unit functions into a marketing program.”

SBU has three major characteristics;
-can be a single business or can be collection of related business
-has all setup competitors
-separate manager responsible for profit performance, strategic planning & controlling

The purpose of SBUs is to develop separate strategies & assign appropriate funds between the identified units.

According to BCG (by considering Relative market share & Annual market growth rate), SBUs can classify into four types;
  • Stars
  • Question marks
  • Cash cows
  • Dogs




Once identified type of SBUs, BCG model suggests four basic strategies for those SBUs;
  • Build strategy -Question marks, Stars
  • Hold strategy -Strong cash cows
  • Harvest strategy -Question marks, Weak cash cows, Dogs
  • Divest strategy - Dogs






2.General Electric Model (GE Model)

Another method of classifying form of portfolio analysis.
Here we classify businesses based on business strength & industry attractiveness.





Industry attractiveness
- Attractiveness of entering or remaining in market in particular industry. This is based on several factors such as;
  • Market size
  • Market growth rate
  • Industry profit margin
  • Amount of competition
  • Seasonality & cyclical demand
  • Industry cost structure

Business strength
-It refers to how strong the strategic business unit, in terms of the market. This includes factors such as;
  • Relative market share
  • Price competitiveness
  • Product quality
  • Customer & market knowledge
  • Sales effectiveness
  • Geographic advantages

Suggestions of GE model;

There are different strategies you can use if you divide SBUs according to the GE model.
(as above)
  •  Invest & growth strategy
  •  Harvest or divest strategy
  •  Maintain investment

Problems associated with BCG & GE models;
  • Each model is costly, time consuming & difficult to use.
  • Evaluate only current businesses & no sufficient contribution to the analysis of future.




                                                                                                 Thank You!

                                                                                                                        -MighTy- 👩

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