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 its business portfolio. A business portfolio is a combination of business and products that make up the company.

What is a Business Portfolio?

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

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

Portfolio analysis involves two steps,

Firstly: The company must analyze its current business portfolio and decide which business should receive more, less, or no investment.

Secondly: It must shape the future portfolio by developing strategies for future expansion or downsizing.

What is Business Portfolio
What is Business Portfolio

How to Analyze 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 tasks in strategic planning.

The company will put more resources into the profitable units and may drop investment in weaker businesses. But it varies among the company and industries. For example, one company may invest more in its loss-making subsidiary if it can see a better future/prospect for that business unit.

Through 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 a 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). The same is applicable to the PARTED Group. In the first step of strategic planning, one must start with the current portfolio analysis to find the stronger and weaker points that will also help the management to take advantage of the opportunities of the environment.

The more attractive the (Strategic Business Unit) SBUs are, the better the market position of the company. This is something like grading 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.

Hope you understand what is business portfolio is and how to analyze it otherwise please feel free to comment below.

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