Product portfolios

Business Management

Product Portfolios

Definition:

A product portfolio refers to the complete range of products or items offered by a business. It encompasses all the diverse products that a company manufactures, markets, and sells to meet the varying needs and preferences of its target customers.

Key Points on Product Portfolios

Scope and Diversity:

• A product portfolio represents the comprehensive collection of products available from a business. It reflects the variety and range of items that cater to different customer preferences, requirements, and market segments.
• Example: Sony, as a prominent example, boasts a wide-ranging product portfolio that includes computers, cameras, televisions, gaming consoles, and more, serving a diverse customer base with varied electronic and entertainment needs.

Analysing the Portfolio

• Businesses often analyse their product portfolios to assess the performance and strategic positioning of individual products within the overall portfolio. One such analytical tool is the Boston Matrix.
• Example: Toyota, a major automobile manufacturer, manages its product portfolio by offering a range of vehicles tailored to different consumer needs, such as small cars like the Yaris for urban commuting, family cars like the Verso for larger households, and luxury cars like the Avensis for discerning buyers.

Boston Matrix

• The Boston Matrix is a strategic tool used to categorise products within a portfolio into four quadrants based on their market share and market growth rate:

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Product portfolios

Business Management

• Stars: Products with a high market share in fast-growing markets. They require investment to maintain their growth.
• Cash Cows: Products with a high market share in slow-growing markets. They generate substantial profits and cash flow.
• Question Marks (Problem Children): Products with a low market share in fast-growing markets. They require strategic decisions, as they have growth potential but may need further investment.
• Dogs: Products with a low market share in slow-growing markets. They may not be profitable and may need reconsideration.
• Example: In the Boston Matrix, a company might identify certain products as "Stars" if they hold a significant market share in a rapidly expanding market, such as a new technological gadget that's gaining popularity.

Diversification and Risk Management:

• Having a well-diversified product portfolio helps businesses manage risk. Relying solely on a limited range of products or having all products at the same stage in the product life cycle can be risky.
• Example: Virgin Group is an example of a diversified conglomerate that operates in various industries, such as music, airlines, telecommunications, and space travel, reducing its overall risk by having products and services in different markets.

Summary:

In summary, a product portfolio encompasses the entirety of a company's product offerings, reflecting the diverse range of items designed to meet varying customer needs and preferences. Analysing the portfolio, often using tools like the Boston Matrix, helps businesses make strategic decisions about individual products to maximise profitability and manage risk effectively.