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Sunday, July 14, 2013



Portfolio analysis is an analysis of the corporation as a portfolio of different business with the objective of managing it for returns on its resources. The business may be in the forms of organizational units, such as different subsidiaries or divisions of a parent company or Strategic Business Units (SBUs). 

Thus, portfolio analysis looks at the corporate investments in different products or industries under the common corporate jurisdiction. The corporate manager analyses the future implications of their present resource allocations and continuously evaluates which operations or products to expand or add, and which ones to be curtailed or disposed off, so that the overall portfolio balance is maintained or improved. The focus is on the present as well as the future.

The activities of a company and its effectiveness in the market place also depends on what the other competing companies are doing. Therefore, the portfolio analysis takes into consideration such aspects as the company’s competitive strengths, resource allocation pattern and the industry characteristics.

Portfolio analysis is primarily concerned with the balancing of the company’s investments in different products or industries and is useful for highly diversified multi-product companies operating in a limited market. The different subsidiaries or strategic business units have to be balanced with respect to the three basic aspects of running the business: 

  1. Net Cash Flow
  2. State of Development
  3. Risk 

Portfolio analysis is one of the methods to assist managers in evaluating the strategy. Let us now discuss different types of Business Portfolio Analyses.

Display Matrices  

The purpose of analysis is to optimally allocate resources for the best total return, with focus on the corporate strategies. Many different approaches involving different display matrices have evolved over the years, with the common objective of successful diversification. Some of the common display matrices are: 

  1. Strategic Planning Institute’s Matrix
  2. Arthur D. Little Company’s Matrix
  3. Hofer’s Product/Market Evolution Matrix



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