Business Portfolio - Definition, Importance & Example
What is Business Portfolio?
Business portfolio is the collaborative view of all goods, factories, financial position, services & brands which a company has. Business portfolio showcases all the offerings that a company has along with its assets as well.
While products are key to any business, the overall competitive position of a company is determined by its business portfolio.
Importance of Business Portfolio
A business portfolio consists of all the assets that are included in the firm’s balance sheet. All the assets which help the business run are seen as individual business drivers. All assets like manufactured goods, investments, factories, services, brands etc. are seen as contributors to the business.
They can be individual business units also which are often called as strategic business units or SBUs. Understanding and nurturing a company's business portfolio is important as it is important to gain competitive advantage to achieve business goals.
Business Portfolio Analysis
For a company to compete, it is important to ensure that all its strategic business units or SBUs are performing efficiently. A few steps to analyze a business portfolio are:
1. BCG Matrix
A company can use a BCG matrix and categorize its critical products, brands and businesses based on market share and market growth.
These categories are known as dogs, cash cows, stars and question marks.
2. GE or McKinsey Matrix
This business portfolio analysis looks at a business by its industry attractiveness against competitive strength. Each parameter is broken down into low, medium and high in a 9 cell matrix. This helps evaluate the performance of a business unit.
Example of Business Portfolio
Consider Unilever, which is one of the largest FMCG companies in the world. Its business portfolio can be analyzed by looking at several assets which it has:
a. Products - The company has a wide range of products from food, beverages, personal care, home care etc.
b. Brands - Unilever's business portfolio includes more than 400 brands out of which 10 brands are over $1 billion
c. Financial Position - The company has a strong financial position and had made strategic investments. Being a global brand, it has presence on NYSE, LSE, FTSE etc.
d. Centers & Offices - the company owns many R&D centers, factories and offices all across the world, which give it a competitive edge globally.
All these business functions or units cumulatively show Unilever's business portfolio.
Hence, this concludes the definition of Business Portfolio along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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