Product portfolio is comprised of all the products which an organization has. A product portfolio may comprise of different categories of products, different product lines and finally the individual product itself. Management is needed on all the three levels of a product portfolio. You need managers for managing individual products, managing product lines and finally the top level management which manages the complete portfolio.
Product Portfolio Analysis:
It means a systematic evaluation or assessment of a company’s product. There are two variables which are frequently used in systematic assessment of a company’s products they are
1. Market attractiveness
2. Business strength
The product portfolio management involves allocation of resources for maximizing the value of the portfolio through a number of key objectives like ROI, profitability, and acceptable risk. A variety of procedures are used for achieving this objective of value maximization that ranges from financial procedures to scoring models.
It involves achievement of desired balance of projects by considering various parameters.
· Risk versus return
· Short-term versus long-term
· Business arenas and technologies
In order to reveal balance, there are various methods used such as bubble diagrams, histograms and pie charts.
Business Strategy Alignment
The portfolio of projects should reflect product innovation strategy of the organization and that the expenditures and spending should be in line with strategic priorities of the organization.
There are three main approaches used for alignment of business strategy.
· Top-down and bottom-up
Achieving efficient and effective allocation of scarce resources
· Communicating priorities
· Achieving balance
· Maximizing the return on various product innovation investments
· Enabling objective project selection
· Achieving focus in activities
· Maintaining the competitive position of organisation
Methods of Product Portfolio Analysis:
There are 4 types of Product Portfolio Analysis methods:
- BCG matrix
- Ansoff matrix
- SWOT analysis
- GE Matrx