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Corporate Portfolio Analysis

Corporate portfolio analysis involves evaluating a company's portfolio of products and business units to determine the optimal allocation of resources. It aims to identify business opportunities, strategize for future growth, and direct resources toward areas with the highest potential. The analysis categorizes a company's products and looks at competition. It evaluates factors like sales, market share, costs, and market strength for each segment. The goal is to balance investments across units considering net cash flow, development stages, and risk to reduce vulnerability and increase strategic effects.

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2K views13 pages

Corporate Portfolio Analysis

Corporate portfolio analysis involves evaluating a company's portfolio of products and business units to determine the optimal allocation of resources. It aims to identify business opportunities, strategize for future growth, and direct resources toward areas with the highest potential. The analysis categorizes a company's products and looks at competition. It evaluates factors like sales, market share, costs, and market strength for each segment. The goal is to balance investments across units considering net cash flow, development stages, and risk to reduce vulnerability and increase strategic effects.

Uploaded by

ASWATHY RAYIRATH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Corporate portfolio analysis

Introduction:
Portfolio is a financial term denoting a collection of
investments held by an investment company, hedge
fund, financial institution or individual.

Portfolio analysis describes an evaluative process or


reviewing the holdings of an entire investment portfolio.
Each asset must be evaluated for performance. Portfolio
analysis also investigates the risk associated with the
present portfolio composition. Mitigating risk is an
indispensable component of portfolio management.
Portfolio analysis
“the strategic units that make up the company and the
attempts to evaluate current effectiveness and
vulnerabilities” (McDonald et al, 1992)

-how much of our time and money should we


spend on our best products to ensure that they
continue to be successful?
-how much of our time and money should we spend
developing new costly products, most of which
never be successful?
Portfolio analysis is an analytical tool which views a
corporation as a basket or portfolio of products or
business units to be managed for the best possible
returns.
It involves identification and evaluation off all
products or service groups offered by company on the
market (so called product mix) and preparing
specific strategies for every group according to its
relative market share and actual or projected sales
growth rate.
A corporate portfolio analysis takes a close look at a
company`s services and products.
Each segment of a company's product line is evaluated
including sales, market share , cost of production and
potential market strength.
The analysis categorizes the company's products and
looks at the competition.
The goal is to identify business opportunities,
strategize for the future and direct business resources
toward that growth potential.
Portfolio analysis in strategic management allows to
answer key questions on how to shape the present and
future business portfolio (of products or services) in
order to reduce the risk of functioning in a changing
environment, and increase the effects of the
implemented strategy.
The aim of portfolio analysis is:-
1) To analyze its current business portfolio and decide
which businesses should receive more or less
investment.
2) To develop growth strategies, for adding new
businesses to the portfolio.
3) To decide which business should not longer be
retained.
Examples of portfolios

Nestle: milk products and nutrition, beverages,


prepared dishes and cooking aids, chocolates and
confectionary, vending and food services
Coca cola: soft drinks, minute maid, mineral water
Amul: cheese, desert, health drinks
Portfolio analysis involves the balancing of the
company's investments in different products and
business units with respect to the following aspects:-
1) Net cash flow
2) Statement of development
3) risk
Net cash flow
A company may have different businesses behaving
differently in terms of their cash flow. It has to balance
different businesses so that there is an overall cash
flow position in harmony with the desired financial
strategy and condition of the company.
State off development
Businesses or products are likely to go through
different life cycles such as embryonic development,
growth, maturity, and decline. A company cannot
depend on one product line alone. For a company to
have stability, it is necessary to match the different
businesses at different stages in their life cycles.
Risk
a corporate portfolio should aim at reducing the risk
of financial setback. A solution maybe to diversify
internationally because of the different market and
economic forces, resulting in different cycles of
development, growth and decline.
Thank you!

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