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Portfolio analysis

How to use portfolio analysis

Find a better market position with portfolio analysis charts

How much do You know about Your product portfolio? Do You know exactly which of Your products are in which stage of life?

Do You know which areas are growing and which are profitable? Do You know whether it is desirable to strive for market leadership, to seek partners or to increase investment? Do You know whether certain products should better be given up? Such issues are often visualized with portfolio diagrams.

Portfolio-StrategyThe word "portfolio" can be traced back to Latin. Taken literally, a portfolio serves to carry leaves: It is a wallet. Today, the word is used in manifold context when one speaks of a collection of similar things. Most probably you will hear it in the context of securities: A vault's content is often referred to as a stock portfolio.

Strategic portfolio analysis starts with similar things. This could be a portfolio of products, industries or markets, for instances. It is about the things by which to make money. Usually we use the term portfolio diagram when, as shown in the image, the considered subjects are classified according to certain criteria. The subjects are grouped and "similar things" are investigated. Often we look for relationships, interactions and developments.

Strategic decisions

In the heart of the matter this is about strategic decisions. It is about the search of the best starting points for product development and investment. For example, we confront the two terms "competitive advantage" and "market attractiveness" and use the corresponding graph to classify our products. Portfolio strategy is then what we make of it.

Put more simply, we ask: In what area and what products are we better than everyone else, closer to the customer's requirements? To which products apply both advantages? How can we earn more?

Which diagrams exactly?

Of course, portfolio diagrams can be found among the strategy charts provided by meineZIELE pro, where they can be created quickly and in unlimited variety. However, less is often more. Therefore, this important principle in advance: Portfolio diagrams are only worth something if they answer our questions and if we get into a position where we can act based on insights. Do not start by trying to paint a colourful image. First specify what question has to be answered with your chart. The diagram itself can be very simple.

Portfolio TrendsPortfolio diagrams help you clarify the positioning and development of products, markets and target audiences. They allow a high density of information in multiple dimensions and sometimes act as clearing as windshield wipers.

Anyone who knows about portfolio strategy has at least one special, simple outline in mind: The famous dogs, stars, cash cows, and question marks from the portfolio analysis by the Boston Consulting Group.

Portfolio analyses are based on many different considerations. Example: In some parts of the purchasing, we can easily dictate prices, in others we have to be happy if everything is delivered on time. Some suppliers are important to us, others are not. Or: With some products we make the money, others will only be profitable in the coming years and are still loss-making today.

Portfolio purchasing powerSo, portfolios can be used in various areas. We then speak of product, procurement, technology or employee portfolios. And of course there are many other applications and special considerations such as "early warning portfolios". Hence, it is interesting that in some situations actually something like "recipes" are available.

For example, the purchasing portfolio on the right shows that there is a procurement risk in plastics. We would actively seek for new suppliers, agree scheduled orders and establish stockpiles. For the modules, however, we would keep low stocks and max the prices. Once recognized the situation, we would have the portfolio in mind, and then we could act basically according to the book. Literature about strategy and controlling are available by the pile.

Where does meineZIELE come in?

PortfolioThe example of the Boston Consulting Group shows how simple things sometimes have to be represented if one wants to be understood. Just the simplicity of the approaches forces a concentrated view of the so-called key variables. For strategic decisions the crucial strengths and weaknesses have to be known. At the portfolio approach, the question is: Which business sectors have such key strengths and which do not? Where are actual investment opportunities and where not?

The idea is to identify these facts and to show them to oneself and others. Anyone how has seen and understood a portfolio once will mostly be able to make reasonable decisions without textbook. Therefore, meineZIELE does not provide the recipes, but will assist you in the presentation of findings and their implementation in actions.

The often tedious data procurement on markets and competitors is not supported as well. However, meineZIELE helps you get these data and findings in an engaging and understandable form. That is what matters.

Example: Portfolio strategy of the BCG

The famous dogs and cows indicated in many textbooks come from the Boston Consulting Group (BCG), an international strategy consulting company.

The model of the BCG considers the product life cycle in a graph which applies market growth to market share. To the top left you will find still new products, the so-called question marks, which require careful selection. These are not yet financeable with their earnings and many of them can turn out to be flops.

Portfolio Boston Consulting Group

To the top right there are already established products. With a high market share in a rapidly growing market, they are actually the stars. They have left the stage of uncertainty. Investments are worthwhile.

To the bottom right, at a high market share in a saturated market one skims what the market will bear. The cash cow is the right image for that.

Finally, there are the poor dogs to the bottom left. Low growth and low market share suggest gradually taking these products from the market.

Of course, there is a lot of academic controversy about where the dividing line between the segments has to be drawn and whether the market share shall be absolute or relative. The user can choose by himself. The labels and scale of the graph are freely adjustable. (Recommended reading: "The Boston Consulting Group On Strategy")

From insight to action

Portfolio to actionActually, it is not difficult to cobble together portfolio diagrams using any graphics software. But there are some outstanding features and comfortable, convenient display options, which make meineZIELE the top choice for developing portfolio strategy.

You could probably find elaborated but never implemented strategies in some drawer of virtually every company. Not with mZ Pro. In mZ Pro a portfolio consideration (and all other strategic planning) is directly included in Your outline of projects, goals and tasks.

In meineZIELE, the portfolio elements are directly connected with the structured entries. You can take measures concerning the displayed elements and include them in the outline as a subordinate goal. Two mouse clicks activate the task and bring it to the daily schedule. Switch from theoretical insights to powerful action in a single second.

Hierarchical portfoliosPortfolio structured

Even the portfolio itself may be hierarchical. In the figure to the right you can see how easy an element is broken into its components with two mouse clicks. That is ideal for discussions with the portfolio on the canvas.

The knowledge gain can be enormous with hierarchical portfolios. That is because sometimes little market segments, which would be put somewhere else generously, lie in a completely different area of the diagram and require a different strategic response.

Design options

With meineZIELE, a portfolio diagram can be designed any colorful or conservative. Also the portfolio circles themselves can have a number of different properties.

The position of a circle could indicate the market share and growth opportunities of a product. Then you could choose the size of the circle for the sales, colours for different product groups, and so on.

If the circles lie close together or overlap each other, it is often advantageous to choose rings. Using sectors or ring segments, even the sales share of the main product or a product group can be highlighted.

Remember, however: Any information is only worth something when it allows us to act. And a graph is at its best when nothing can be left out anymore. In any case, meineZIELE provides all the options.




Portfolio product lines


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