8 Key excerpts on "Business Portfolio"

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  eBook - ePub

  Value Innovation Portfolio Management

  Achieving Double-Digit Growth Through Customer Value

  • Sheila Mello, Ronald Lasser, Wayne Mackey(Authors)
  • 2006(Publication Date)
  • J. Ross Publishing

    (Publisher)

  portfolio . This narrowness occurs along two dimensions: scale and depth. In the broadest sense, a portfolio consists of items to which a company must decide whether to allocate resources. Instead of just managing a portfolio of individual products, as small companies may, large companies with multiple product lines should be making portfolio decisions at the level of the product line, business unit, or even subsidiary company. The principles we discuss in this book apply to portfolio management on any scale.

  To deepen the definition of a portfolio, we offer the idea that product portfolios are about more than products. This expanded definition holds that a product portfolio consists of all the products and services a company intends to commercialize and the related initiatives required to improve the company’s ability to commercialize those offerings. A company selling packaged frozen food, for example, must conceive of its portfolio as more than plastic bags of peas. The portfolio includes all those things necessary to bring the peas to a consumer’s table: processing capability, refrigerated trucks, refrigerator cases in grocery stores, and even in some instances the marketing campaign required to tell people why these are the best peas to buy. As we discuss in more detail in Chapter 8 , the portfolio includes not only the product but also the associated technologies on which it’s based, the infrastructure that supports it, and the marketing activities that impact it.

  While the portfolio management process as we present it includes a wide range of activities, we want to clarify the demarcation between portfolio management and product definition , because many of the customer-oriented, value-seeking actions we identify for managing the portfolio also apply to product definition. Most significantly, the overseers and the outcomes of portfolio management and product definition are different. Executives are responsible for portfolio management (or ought to be), while high-level managers do not necessarily play a role in defining individual products. The output of the portfolio definition process can be thought of as the definition of a collection of gaps in the market that need to be filled (the portfolio roadmap described in Chapter 4 ), while the output of product definition is a description of the features of a product that will fill the customer needs. Once a project’s mission is clear at a portfolio level, each product development project can begin with its own initiative for gathering further customer data. Of course, portfolio management and product definition occur along a continuum, which is why the two-way communication we discuss in Chapter 6

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  eBook - ePub

  The Sports Management Toolkit

  • Paul Emery(Author)
  • 2011(Publication Date)
  • Routledge

    (Publisher)

  Sport organizations exist to provide something of value, usually in the form of different products and services to meet and hopefully exceed customer needs. Collectively these outputs constitute your organization's product mix or Business Portfolio. Within this portfolio some products as well as product lines will naturally be more profitable than others, currently and/or in the future. So the frequent management dilemma arises: how do you balance the conflicting demands of different products and services competing for often scarce organizational resources? What level of priority and balanced investment risk should you adopt to ensure a sustainable future?

  Addressing such questions requires the application of strategic marketing analysis tools of Business Portfolio analysis. Applying the ubiquitous concepts of the product life cycle (the time period between the inception of a product and its discontinuation in the marketplace – Johnson, 2009) and strategic business units (autonomous operating businesses or departments, product lines, or products or brands that are sold to a well-defined market or segment – Kotler and Keller, 2006), this chapter will introduce you to two of the most effective and popular diagnostic marketing techniques:

  1   Boston Consulting Group (BCG) matrix – a graphical approach to strategic business unit analysis of a multi-segmented organization, classifying strategic business units according to relative market share and market growth;

  2   General Electric (GE)/McKinsey multiple factor matrix – a more sophisticated portfolio management tool that adopts a nine-cell matrix of analysis based upon industry attractiveness and business strength.

  To achieve the strategic aim of maximizing profit from competing products across different life cycles, this chapter will describe the key principles and evolving theory of portfolio models. Having identified their purpose, their assumptions and typical applications, you will be provided with an applied sport example in which to understand the process of construction, analysis and appropriate management interpretation.

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  International Marketing (RLE International Business)

  A Strategic Approach to World Markets

  • Simon Majaro(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  A country which fulfils the first condition without the second is an unsatisfactory target market. So is the one that fulfils the second criterion without offering a tangible marketing opportunity. Many marketers tend to forget the very important second criterion described. They take the very simple view that the larger and richer markets are the ones that should be pursued with vigour. They often apply the Pareto Law by dividing the world into discrete segments. The 20% of the countries of the world which represent 80% of the wealth or the consumption levels are considered as the most suitable opportunities to exploit. Alternatively they take a graph paper and plot a correlation diagram. On one axis they place such a parameter as ‘per capita income’ and on the other axis they might record ‘consumption level of product x or commodity y’. Obviously where the product consumption depends on the level of living standard a fairly linear scatter diagram should emerge. The richer countries would show higher levels of consumption on a per capita basis. At this point the marketer may often fall into the trap of concluding that the top 10 or 20 countries on his scatter diagram represent his best opportunity markets. Of course this is not always a sound marketing policy. Firstly high consuming countries are often the sort of markets that a newcomer with limited resources should avoid owing to the excessive competition that probably prevails there. Secondly as stated earlier the fact that a country seems to be an attractive market does not necessarily mean that it is attractive to a specific marketing organisation. It may be totally incompatible with the marketing firm's specific strengths and resources. After all this is precisely what the planning process is seeking to establish. An opportunity can only be classified as one when the firm has the resources, skills and competence to take advantage of it.

  The ability to match the two dimensions—the external one and the internal one—is what the marketing planner must aim to achieve. The external dimension is the quantitative data about the marketplace and the potential opportunity that it offers. The internal dimension is the thorough and up-to-date assessment of the firm's ability to cope with the opportunity that the marketplace is presenting.

  The ‘Business Portfolio’ concept that emerged during the last few years seems to offer a useful methodology for matching the two dimensions thus described. In the next few pages the logic of this method will be explored and its application to international marketing decisions considered.

  The ‘Boston Effect’

  The tool which we call nowadays the ‘Product Portfolio’ or more broadly the ‘Business Portfolio’ started its life under the title of the ‘Boston Effect’. It emerged a few years ago as a result of work carried out by the well-known firm of consultants the Boston Consulting Group. Like most effective tools of management it is a very logical and simple concept to apply. In analysing the relative performance of clients’ products/ activities mix the Boston Consulting Group sought to categorise such products into four groups as described in Figure 57 .

  Fig. 57 The Business Portfolio or Growth-Share Matrix

  Each quadrant of the diagram represents the relationship between the market share that the product and/or activity has achieved and the market growth rate

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  eBook - ePub

  CIM Coursebook: Delivering Customer Value through Marketing

  • Ray Donnelly(Author)
  • 2010(Publication Date)
  • Routledge

    (Publisher)

  CHAPTER 2 Managing and Developing an Organisation's Product Portfolio

  DOI: 10.4324/9780080961255-3

  Learning Objectives

  By the end of this chapter you will be able to:

  • Evaluate the main marketing tools used to manage individual products and product portfolios
  • Apply product management tools and techniques in various organisational contexts

  Introduction

  In this Chapter readers will be shown the advantages of strategic product management and, at the same time, will be asked to consider the limitations and how this might be managed. A variety of different techniques will be explored including Product Life Cycle, BCG Matrix, and the GE Matrix. They will equip the reader with a number of options in achieving effective product management and this will be set in various contexts.

  Product Management Process

  Organisations generally try to offer customers a range of products suited to their particular needs based on their knowledge of the market. Very few organisations have just one product to offer their customers and a range of products allows for segmentation, targeting and positioning (STP) of the portfolio, leading to a greater market share, higher levels of customer satisfaction and increase resilience for the organisation.

  Additional products cannot be added to the portfolio without considering the impact on other products and how they are performing (e.g. financially, or by market share) and therefore a range of portfolio management tools must be utilised to ensure the portfolio is effective. Products need to be managed effectively so that customers receive a best in class product and the organisation maximises its opportunities for profit.

  Additional products must be added in a systematic and logical way. Product management is integral in creating value for customers, it does this through the effective management of the marketing mix (4/7Ps) in order to satisfy customer needs – see Table 2.1

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  The Official CIM Coursebook

  • Isobel Doole, Robin Lowe(Authors)
  • 2012(Publication Date)
  • Routledge

    (Publisher)

  Units 9 (communications and relationship building) and 10 (pricing, supply-chain and partnership development) to fully understand the value benefits of integrating the marketing mix.

  In this unit we focus on portfolio management, maintenance and development and specifically on the decisions that are made on branding, both at a strategic level to increase brand awareness, impact and equity and at an operational level, in the application of branding to products and services. We then turn to the management of the portfolio of products and services and focus on the management decisions of maintaining and building the portfolio, where necessary, carrying out rationalization, NPD and service enhancement.

  Before starting this unit, students should familiarize themselves with the issues of branding, product and service, and NPD concepts, using the reading mentioned in the ‘Further study’ section.

  Key definitions

  A successful brand – is an identifiable product, service or place augmented in such a way that the buyer or user perceives relevant, unique, sustainable added values that match their needs most closely (de Chernatony, 2001).

  Product portfolio – is the collection of products and services that are managed together rather than as individual products.

  Brand equity – is the net present value of the future cash flow attributable to the brand name.

  Intangible assets – non-material assets such as technical expertise, brands or patents.

  Adding value through branding

  Previously in this coursebook we have emphasized that for many global companies today it is their intangible assets that provide their most significant source of future competitive advantage. Of these intangible assets the brand is the most significant. For example, the brand equity of the Coca-Cola brand was estimated by Interbrand to be worth $70 billion in 2006. The brand has been created through sustained marketing investment in advertising and promoting a consistent message for over 100 years.

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  Marketing Briefs

  • Sally Dibb, Lyndon Simkin(Authors)
  • 2007(Publication Date)
  • Routledge

    (Publisher)

    The market attractiveness—business strength model is commonly known as the directional policy matrix (DPM). Instead of using single measures for the matrix axes as with the BCG growth-share matrix, the DPM enables several criteria to be assessed on both axes: market attractiveness criteria and business strength/position criteria. For this reason, it is increasingly popular in marketing oriented businesses. Each company adopts its own set of specified criteria, but utilizes the same variables and weightings over time in order to track changes in the fortunes of strategic business units (SBUs) or individual products.

    The ABC sales: contribution analysis assesses the financial worth to a company of individual products, customers, market segments or strategic business units. A plot of sales and financial contributions enables marketers to judge where to devote their sales and marketing resources, which products, customers or market segments require more attention, and which no longer warrant resourcing.

  Conceptual overview

  Most organizations have a portfolio of brands or products. One marketing team may control the whole portfolio or separate groups of marketers may be responsible for one or a family of brands. Either way, the company's senior managers must know which particular products have the greatest chance of success, where they are in terms of the product life cycle, how each will be affected by changes in the marketplace and market attractiveness, which exhibit business strengths and where best to allocate sales and marketing budgets for the overall benefit of the business. The product portfolio approach to marketing management presents marketers with a set of analytical tools to help facilitate this complex task. The most popular of these techniques include the ABC sales : contribution analysis, the BCG growth-share matrix, and the directional policy matrix (DPM).

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  Business Development for the Biotechnology and Pharmaceutical Industry

  • Martin Austin(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  2Planning the Portfolio

  Portfolio management

  Every company can be thought of as following a broadly similar pattern to the three ages of man: birth, growth and then death. However, the company, unlike a person, can be rejuvenated even if its products fail: introduction of innovations through research and development, licensing or acquisition can bring new life to the company. New companies are started on the basis of innovative technologies and suffer all of the problems of young children. Children have no support without a parent, they are highly susceptible to diseases and accidents and in the early years are unsteady on their feet. The same is true of a fledgling company. Yet, with luck and judgement, growth can be rapid leading to significant value creation in a short period of time. When a child reaches adolescence, this rapid growth brings its own problems: finding sufficient food, clothes to wear and a role in life.

  The parallel for a rapidly growing company is the need for investments in manufacturing, larger premises for administration and a broader portfolio of products. When personal maturity comes to the young person, it brings with it a steady income yet many dependants: there is a need to consolidate investments and provide for the long term. On the other hand, for the mature public company there is no option to consolidate and still provide a nearly steady income. Only by continued growth can the company maintain or increase its value. This is the imperative under which most companies are run and is the stimulus for business development activities across the board.

  One of the key activities of the business development role is maintaining the portfolio of products within the company. It is therefore necessary to understand the objectives of the company and to plan accordingly. Depending on the scope of the business development role within the company, planning may also include the creation and maintenance of company strategy. Alternatively the business development person may be the agent of the strategy created by the CEO and the board. In the larger corporations business development takes on a pivotal role in both the creation and conversion of strategy into practical applications. Strategic planning as a function, therefore, should be examined in some detail.

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  Strategic Marketing Planning

  • Richard M.S. Wilson(Author)
  • 2010(Publication Date)
  • Routledge

    (Publisher)

  In this, the first of three chapters on strategy, we have taken as our primary focus the nature and development of portfolio analysis. As a prelude to this we examined the development of strategic perspectives since the 1970s, highlighting the way in which the environmental turbulence that characterized the early 1970s led to many managers rethinking their approaches to running their businesses. The new planning perspective that emerged was, we suggested, based on three central premises:

  1. A need to view and manage the company’s businesses in a similar way to an investment portfolio
  2. An emphasis upon each business’s future profit potential
  3. The adoption of a strategic perspective to the management of each business.

  The starting point for portfolio analysis involves identifying the organization’s strategic business units, an SBU being an element of the business as a whole that:

  • Offers scope for independent planning
  • Has its own set of competitors
  • Has a manager with direct profit responsibility who also has control over the profit-influencing factors.

  A variety of approaches to portfolio analysis and planning have been developed, the best-known of which are:

  • The Boston Consulting Group’s growth–share matrix
  • The General Electric multifactor matrix
  • The Shell directional policy matrix
  • The Arthur D. Little strategic condition matrix
  • Abell and Hammond’s 3 × 3 investment opportunity chart.

  The conceptual underpinnings in each case are broadly similar, with consideration being given in one form or another to the SBU’s competitive position and market attractiveness/potential. Each of the portfolio models also encompasses a series of strategic guidelines, and these were examined.

  Against this background, we focused upon the limitations of portfolio analysis. Although it is acknowledged that these models have encouraged managers to think strategically, to consider the economics of their businesses in greater detail and to adopt a generally more proactive approach to management, critics have argued that the models are overly simplistic in their structure and often require data inputs that are complex and difficult to obtain. Because of this, it is suggested, usage levels are generally low.

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