Business Marketing Strategy: Designing the Business Portfolio

Guided by the company's mission statement and objectives, management now must plan its business portfolio - the collection of businesses and products that make up the company. The best bus portfolio is the one that best fits the company's strengths and weaknesses to opportunities in the environment. 

Business portfolio mining involves two steps. First, the company must analyze its mt business portfolio and decide which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing.

Analyzing the Current Business Portfolio

The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses that make up the company. The company will want to put strong resources into its more profitable businesses and phase down or drop its weaker ones. Management's first step is to identify the key businesses that make up the company, called strategic business units ( SBUs ). 

An SBU can be a company division, a product line a single product or brand. The company next assesses the within a division, or sometimes attractiveness of its various SBUs and decides how much support each deserves. When designing a business portfolio, it's a good idea to add and support products and businesses that fit closely with the firm's core philosophy and competencies, The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. 

So most standard portfolio analysis methods evaluate SBUS on two important dimensions - the attractiveness of the SBU's market or industry and the strength of the SBU's position in that market or Industry. The best-known portfolio-planning method was developed by the Boston Consulting Group, a leading management consulting firm. '

The Boston Consulting Group Approach. 

Using the now - classic Boston Consulting Group ( DCG ) approach, a company classifies all its SBUs according to the growth-share matrix as shown in Figure 2.2. On the vertical axis, the market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. 

The growth-share matrix defines four types of SBUS: Stars, Stars are high-growth, high-share businesses or products. They often need heavy Investments to finance their rapid growth. Eventually, their growth will slow down, and they will turn into cash cows.