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A company analyses its product portfolio by assessing the performance and potential of each product in its range.
In more detail, a company's product portfolio is a collection of all the products or services it sells. Analysing this portfolio involves evaluating each product's market share, growth potential, profitability, and alignment with the company's overall strategic objectives. This analysis helps the company to make informed decisions about where to invest, what products to develop, and which ones to discontinue.
One popular method for portfolio analysis is the Boston Consulting Group (BCG) matrix. This tool categorises products into four types based on their market growth rate and relative market share: stars (high growth, high share), cash cows (low growth, high share), question marks (high growth, low share), and dogs (low growth, low share). Each category suggests a different strategic approach. For example, 'stars' might warrant further investment to maximise their potential, while 'dogs' might be candidates for discontinuation.
Another method is the GE/McKinsey matrix, which considers market attractiveness (including factors like market size, growth rate, and competitive intensity) and business strength (including factors like brand strength, customer loyalty, and production capacity) instead of just growth and share. This provides a more nuanced view of a product's position.
In addition to these quantitative methods, qualitative factors are also important. These might include the fit with the company's brand, the potential for synergy with other products, and the strategic importance of the product (for example, a 'loss leader' that attracts customers to more profitable products).
Finally, it's important to remember that product portfolio analysis is not a one-off exercise. Markets and customer preferences are constantly changing, so companies need to regularly review and update their product portfolios to stay competitive.
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