What is Business Portfolio and How to Analyze it?

Do you know what is business portfolio? In one word Based on mission, objectives and vision, management now must decide on their business portfolio. Business portfolio is the combination of business and products that make up the company. Let’s know detail about business portfolio.

What is business portfolio

Whenever we are saying group of companies, we mean many business are operating under the same umbrella. In that specific case the management has to decide about the further investment or future about the companies they are holding currently.

If there is a single company, the management has to decide about the product’s future. The best business portfolio shows its fitness with strengths, weaknesses and opportunities and threat.

Business portfolio analysis involves two steps,

  1. Firstly: The company must analyze its current business portfolio and decide which business should receive more, less or no investment.
  2. Secondly: It must shape the future portfolio by developing strategies for the future expansion or downsizing.
What is Business Portfolio

What is Business Portfolio

Analyzing the current business portfolio

Management’s evaluation of the products and business units that make up the company is called portfolio analysis. This is one most critical and crucial task in the strategic planning.

Company will put more resources in the profitable units and may drop investment in weaker businesses. But it varies among the company and industry. For example, one company may invest more on their loss making subsidiary if they can see a better future/prospect of that business unit.

By the portfolio analysis a company can easily make a comparison among its business units. That helps the managers to take current and future business decisions. At the initial stage the management must find out and list the key business units that make up their business decisions.

At the initial stage the management must find out and list the key business units that make up their business. A strategic business unit (SBU) is a unit of the company that may have separate mission, vision, objectives and that plan independently from other company owned units.

Think of SQUARE, this group has many SBUs operating independently in different fields (see the illustration capsule). Same is applicable for PARTED Group. At the first step of strategic planning one must start with current portfolio analysis to find the stronger and weaker points that will also help the management to take advantages of the opportunities of the environment.

The more attractive the SBUs are, the better the market position of the company. This is something like grading of the subjects one is undertaking in a semester which can give you an idea about in which subject you are doing well and in which you are performing poorly. Probably that will lead the student to specialization in a specific field.

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