Portfolio Discussion

Portfolio - a collection of products, services,
or brands that are offered for sale to a
customer in order to achieve diversification
and balance.

Framework I use for Product
Portfolio analysis

For additional Information
Contact paul.bosetti@gmail.com

Framing the Portfolio Strategy
Build on the current strategy and dig deeper
“Desire for growth while managing Risk”

Build Current State
• Detailed business analysis & Competitive landscape analysis
Define Future State To Ensure Long Range Profits & Cash Flow
• Correct product mix to match company strategy
• Possible growth platforms to launch new offerings. Determine how the
financial and corporate strategy will link in with the Portfolio Strategy

Execute
• Develop detailed plans and implement

Paul.bosetti@gmail.com

Current State Review

Current State, possible analysis steps in defining Portfolio Strategy*

• Map revenues, customers, and gross margin to market segments
• Conduct detailed ABC analysis of revenue generation activities
• Determine cost to serve models “prune” unprofitable customers or
move them into a different line segment
• Interview key customers and management personnel
• Assessment of Industry attractiveness

• Economic analysis
• Barriers to entry
• Competitors

*Portfolio models are narrow in nature. They may obscure the most
essential strategic issue in building a portfolio…what are the drivers for
creating and enhancing interrelationships?

BCG Growth Share Matrix
BCG matrix is good for picturing aggregate composition.
Plot current market share within target segments.

This is a simple
matrix which is
High
useful in laying Star
out the current Question

Industry
Growth
state, but a more Mark
robust analysis
will aid in

developing a Low
strategic portfolio Dog
Cash
plan Cow
Bubble denotes
High Low
current market %
of portfolio Relative Mkt.
Share

Business Assessment Array
Analysis that uncovers more information about Market opportunities
& competitive position through composite dimensions

Build a hierarchical High A B C
analysis at the

Attractiveness
product offering

Industry
within industry B C D
Med
segments

Industry Business

C D D
Low
Attractiveness Strength
Market Position
Market Size
Market share
High Med Low
Market Growth
Share growth
Profitability
Business Strength
Share compared with
Cyclicality
leading competitor
Ability to Recover A-Investment/Growth
From a Recession Competitive Strength
B-Selective Growth
Quality leadership
C-Selectivity
Technology
D-Evaluate
Relative profitability

Review ABC Segmentation/Strategy
Portfolio review may lead to analysis that uncovers
extreme concentration of sales in a few customers

100% 100%
80% 80%
Cumulative
Cumulative
% of
% of 50% 50%
Sales/Profits
Sales/Profits

0% 0%
20% 50% 100% 35% 50% 100%
Percentage of Routes/Industry Percentage of Customers/Segments

Action Plan
Customer/Product Evaluation
Cutomer/
Industry/ 2003 2003 Strategicaly
Action Plan
Route Revenue Profits Important
Retain Customer A
A 100 20 Yes
Grow Segment B
B 25 5 No
Enter market X
C 75 15 Yes
Enter new businss
D 20 2 Yes

Future State
Future State: Once the industry trends, competitive pressure,
competitive advantages, and risk tolerance is defined
then we can answer:

• Should we be in these business segments*?
• Should we add a new product?
• How can we win and hold a substantial share of the market?
• How should we grow our presence in other segments to
minimize risk and maximize our profits?

*Segmentation should be limited to grouping those buyers who share
strategically relevant situational or behavioral characteristics. This will
lead to effective cost to serve models.


Defining the value of new ventures

Need to follow a systematic approach in defining how to build
the business case and leap into new business horizons
from our core competencies

Develop Cost
Sales
($) Dollars

Key Performance Measures
Cum. EBITA
Gross Margin %
NPV @ Disc Rate $
# years break even #

Prob. Of success %
Strategic direction (text)

Project Horizon

Financial Projections 2004 2005
Sales $ $
Cost $ $
Cash Flow $ $

Additional thoughts
To “predict” future growth we may also want to measure
and follow actual and estimated GDP and IPI
Real Gross Domestic Product (GDP)
• Measures the value of goods and services produced in US
excluding inflation
Industrial Production Index (IPI)
• Measures the physical units & inputs into the US production
process
Other correlation possibilities
• Durable good orders (indicate possibly inventory restocking)

• Corp Profits
• Consumer confidence (Increase income, Increase job mkt.)

2003nd
1st Half 2 Half
2003 Results 2.4% 6.1%
GDP

IPI (1.1%) 5.1%

Portfolio Discussion

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