business portfolios – A business portfolio rightly describes a c

What is Business Portfolio

A business
portfolio normally includes the collection of businesses and products
that constitute and make up a company. A business
portfolio rightly describes a companys strength and helps the company
to exploit the most attractive business opportunities.

The analysis of the business
portfolio helps a company to decide to whether its businesses should
receive more or less investment. Further the portfolio also helps to determine
and develop growth strategies for introducing new products and earning
new businesses. On the same time a portfolio also helps a company to decide
upon whether it should or not retain certain products.

Planning a Business Portfolio

Creating or planning a business
portfolio encompasses several attributes. It is a strategic and systematic
process.

1. Identify Strategic Business
Units (SBU):

The first step in planning is to identify
various Strategic Business Units (SBU) in a company portfolio. SBU refers
to that unit of a company that can be planned independently from other
businesses and have a separate mission and objective. Normally a SBU can
be a company division, a product line or even an individual brand. More
or less it depends on the company nature and organization.

2. Market Attractiveness :

When planning a portfolio a company
should try to understand and determine as to what is in the market that
they can exploit. They need to understand to which market they should
be attracted. There are various factors that make a certain industry attractive.
A business portfolio should be planned only after analyzing these factors.
Typical factors that affect the market attractiveness include:

• Market Size

• Market growth

• Market profitability

• Pricing trends

• Competition

• Overall risk of return on investment

• Segmentation

• Distribution structure

• Division of products and services

3. Competitive Strength :

The analysis of the competitive strength
provides the company the dimensions of assessing the competitive position
of each SBU. There are several factors that need to be evaluated for obtaining
the competitive strength. The most important factor include:

• Competencies of the assets and
their strength

• Relative strength of brands

• Customer royalty

• Comparison of cost structure
with competitors i.e. relative cost position

• Distribution strength

• Records of innovations and new
technologies

• Access to financial and other
investment resources

Business Portfolio Management

The panning of the business portfolio
further depends on many individuals and teams of the same company. In
a big company these teams and individuals are often decentralized and
have their own agenda. For proper business management of the business
portfolio, heir knowledge, ambitions and decisions are aligned with the
short term financial necessities of the company. On the same time these
attributes are balanced against the long-term strategic goals of the company.

Several Business portfolio management
software systems have been developed. They mainly focus on tracking and
reporting internal operation measures, while the market and competitive
intelligence are unsupported. The process of planning often is very complicated
and intertwined thus it is implemented different levels of business portfolio
management.

Product level Market Portfolio
Management:

At this level the management process
helps to produce hybrid decision support models, wherein the process combines
the internal finances with external market focus. Reality-based score
cards are prepared. The criteria include market attractiveness, product
strength, strategic fit and risk. The score cards provide with an essential
cross-check for financial projections and aspirations. Graphical
portfolios are created which show the evolutions of the market over
the time and help in developing alternative product market strategies
that can be assessed and optimized.

Corporate Portfolio Management
:

For a big organization SBUs operating
in different markets can be compared objectively to the parameters of
value creation potential, risk and fit and financials. The management
systems help to highlight the implications and trade-offs of resource
allocations choices. As a result the management system allows enhanced
target setting and an appropriate portfolio and integration.

Industry and Competitor Portfolio
Management (ICPM):

The management system enables to obtain
a multi-layered interactive picture of all the main segments and of the
industry. Further the system also reveals the key positions of all competitors.
Based on the rigorous external analysis of market attractiveness profiles
and critical success factor analysis the ICPM makes the competitors preemption
more useful and also increases the levels on new business development
and global category management capability.

Key features of the Software
Solution

1. The business management solution
enables portfolio visualization and animation.

2. It further enables multi-dimensional
portfolio analysis.

3. The software offers a criteria-based
decision support.

4. It helps to make predictive business
models.

5. The software help for resource optimization

6. It also allows project tracking and
workflow, thus enabling efficient document management.

Benefits of Business Portfolio
Management

1. The management process helps greatly
to reduce investments risk while maximizing the return and value of the
investments.

2. A good planning enhances the communication
and alignment between IS and business leaders.

3. Proper planning induces a team spirit
and encourages the leaders to think of the team and become more responsible
towards projects.

4. Proper planning allows planners to
schedule resources more efficiently.

5. The planning process helps to identify
the redundant projects and make it easier to kill projects.

Hurdles with Business Portfolio
Management

As being a relatively new concept there
are a few major hurdles that a company may come across when managing a
business portfolio.

1. Till now single solution software
has not been developed for portfolio. The solutions developed normally
undertake a specific task of the management process.

2. In absence of proper document management
system obtaining good information becomes very difficult. To react and
mold according to the market promptly a proper database and information
is a must.

3. Often it is difficult to decide as
to which products should be removed for the final portfolio.

4. Planning a business portfolio is
a time consuming process and coordination becomes difficult with busy
executives. Time constraints are a major hurdle with management and planning.

Having a proper and accurate business
portfolio is a critical part of any business development process and planning.