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Home >> Portfolio >> Analysis

Portfolio Analysis

A portfolio of a company is the sum total of its business, assets and products. A perfect portfolio analysis is shaped to meet and suit the company's potency and also enable it to exploit the best opportunities available to the company. Analysis of portfolio involves deciding upon the relative importance of available business and investment opportunities by accessing the business portfolio of the company. This portfolio analysis also involves formulating strategies that would add to the business portfolio in terms of new business opportunities and products.

The best portfolio analysis takes into account the locating of the different Strategic Business Units (SBU) present in the portfolio of a company. These SBUs have business objectives and missions independent of the other business objectives of the company. An SBU can be the following three things:

  • Individual brands
  • Product lines
  • Company division

    The basic postulates that are involved in portfolio analysis are common to all companies. Analyzing market attractiveness is perhaps the most important part of portfolio analysis. The following are the ways of determining it:
    • Market growth
    • Market size
    • Market profitability
    • Intensity of competition in the market
    • Pricing trends
    • Segmentation
    • The risks involved in returns in industry
    • The distribution structure that is wholesale, retail or direct
    • Available opportunities for differentiating between products and services
    Accessing competitive strength of the company is also another important strategy of portfolio analysis. The following points must be considered while analyzing a portfolio:
    • Market share
    • Relative brand strength
    • Distribution strength
    • Loyalties of customers
    • The extent of the company's access to investment and financial opportunities
    • Relative cost position
    • Records of technological innovations
    When it comes to portfolio planning methods, the two most popular methods are as follows:
    • Boston Consulting Group Portfolio Matrix
    • McKinsey / General Electric Matrix
    A portfolio analysis helps in optimization of investments and locates relative opportunities of productive business. The tools of portfolio analysis help in maintaining a balance in the business portfolio of a business. The performance of the company over a period of time can also be evaluated through it and therefore plans for the future can be formulated.

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