The Difference Between Product Portfolio & Business Portfolio

A business portfolio is a company’s set of investments, holdings, products, businesses and brands. A product portfolio is the product’s mix of market segments. Marketing managers attempt to make a product appeal to specific groups of people, called segments.

Examples of segments may be college graduates, baby boomers living Philadelphia or blue collar workers. Both types of portfolios help companies grow financially. Reviewing business portfolio meaning and a product portfolio definition will help you understand these differences more clearly.

The Growth-Share Matrix

The growth-share matrix developed by the Boston Consulting Group may be applied to both types of portfolios, but in different ways, explains NetMBA.com. The growth share matrix places business holdings or markets in one of four categories: star, cash cow, question mark and dog.

The categories depend on two variables: the size or share of the market segments, and the growth in sales of the product or business. Stars are high-growth, high-share businesses or markets. Cash cows are low-growth with high shares. Question marks are high-growth with low market shares. Dogs are low-growth and low-share.

Strategic Business Units

The items in a business’s portfolio may be called strategic business units, or SBUs. When using the growth-share matrix to analyze SBUs, business managers analyze the SBU, not the market. Star SBUs are usually new businesses generating high public interest. Star SBUs need a lot of capital to fuel their rapid growth.

Cash cows are holdings that many people need to keep buying on a regular basis. Banks, groceries and toiletries are all cash cows. Dogs are usually out-of-date products such as typewriters or analog televisions. Question marks are novel or fad items that may become any one of the other types of SBUs.

Looking at Products

When using the growth-share matrix to analyze products, marketing managers analyze the potential of the product’s market. So the market segment becomes labeled as a cash cow, a dog, etc.

This is distinct difference from SBU growth analysis, because SBU tends to look inward, while product analysis focuses more on market segments. Marketers must look at the market segments in relation to the product.

For example, an expensive laptop may be a star in wealthy homeowner market segments, a question mark for college students and a dog for low-income families. This analysis helps marketers know how to gear their advertising.

Assessing the Risks

To manage both business and product portfolios, companies balance risking capital with guaranteed returns. Companies are always attempting to create or hold stars and cash cows. For example, a business may take the money from an SBU that’s a cash cow and risk it to buy a question mark that it expects to turn into a star – and eventually another cash cow.

Product managers do something similar with market segments. A product manager may use the funds from selling to a cash cow segment to break into a new segment that may become a star.