Product portfolio analysis
Most firms will have a portfolio of products on offer to their customers, rather than individual products or brands, and will in many cases have branded products which complement each other is some way.
To maintain, or improve profitability, it is advisable for a company to have products at various stages of their life cycle.
A firm will gain a reputation for developing and exploring its core competence in the production of a certain types of product. Ford, for example, is known for its cars and not for any other unrelated products. However, some multinational conglomerates may offer a huge number of diverse, unconnected goods and services.
The Mitsubishi group of companies is an example of a conglomerate with many divisions unconnected in terms of output. The group consists of 315 separate independent companies within five distinct divisions with a very broad product portfolio:
- Heavy Industries
The Mitsubishi Corporation division itself employs over 50,000 people and has seven business segments including finance, banking, energy, machinery, chemicals and food.
Prepare a short summary of the Mitsubishi group using facts and figures to support your outline:
Describing how the businesses within the Mitsubishi Group are organised.
Outlining the activities of the separate Mitsubishi Corporation division, with examples of some of their activities
A product portfolio is the range of products manufactured or supplied by a firm.
Having a broad product portfolio allows the business to spread its risks because as one product declines in a portfolio another may take its place.
Product portfolio analysis is used to assist in planning product development and strategy by:
- analysing an existing portfolio to decide which products should receive more or less investment, and
- adding new products to the portfolio or deciding which products and businesses should be eliminated.
The best product portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities.
The business portfolio refers not just to products, but also to the collection of separate businesses and/or strategic business units (SBUs) that make up the firm. The term Strategic Business Unit was developed in the 1960s, to classify General Electric's many business units.
A SBU is a business division within a large organisation, which shares the organisation's market and customer focus, but is distinguishable because it is a relatively independent with a coherent set of products, objectives, strategies and competitors.
An SBU is a set of product divisions that manufacture interrelated or similar products. The main philosophical concept behind the formation of strategic business units is to serve a clear and defined market segment along with a clear and defined strategy.
Therefore, to be considered an SBU, a business unit should:
- possess its own separate mission distinct from the mission of other SBUs in the group
- develop its own integrated plans separate from those of other SBUs
- have a definable group of competitors
- manage its own resources.
For example the Coca-Cola Company in the UK is organised into six geographic SBU's.