BUSINESS REPORT

Business Report

Business Report

Portfolio Review

The increasing rate of change in the economic, political and social environments of business today has lead to growing competitiveness, uncertainties and risks. These circumstances have led to a dramatic increase in attention given to strategic planning of all kinds. Marketing planning has itself received a good deal of attention in recent years.

The portfolio concept focuses on the interdependencies among the various management decisions, and emphasises an integrated approach to the management of the company's various business units to achieve long-term objectives. The concept has been developed for applications in corporate strategy, product planning, customer segment planning and supplier choice and development. The increasingly widespread use of such models has, it is suggested, enabled management to assess more efficiently the company's positions: present, projected future and future desired positions on various dimensions.

It is important to note that a fundamental set of assumptions surround investment portfolio models. Perhaps the most important and challengeable is the implicit assumption of perfect knowledge of investment options by the planner; the models also tend to ignore the time and cost factors inherent in switching investments. The extension of the concept into the corporate strategy and marketing planning fields has been less open to criticism on these points as subsequent sections will show.

Benefits of Portfolio Review

Many portfolio models such as the product portfolios, growth-share matrix and business screen when applied to international business, have been criticised as being merely extensions of their domestic orientations. The factors or criteria used in these models are too narrow in scope and they preclude factors which are international in nature. Wind and Douglas [3] emphasised the need for adoption of a global portfolio perspective in order to determine an optimal combination of countries, products, market segments, and modes of operation to maximise long-term profitability.

Such a practice is not only essential for international companies but also valid for companies which are purely domestic in nature. For the former category, a global portfolio perspective would enable the company to evaluate the degree and nature of its involvement in international markets. Opportunities for improving profitability by reallocating resources and efforts across countries, product lines, and modes of operation, etc., can be assessed. For domestic companies the concept enables them to monitor growth opportunities in overseas markets, hence widening the horizon for expansion and exploitation of their existing product lines, R&D, marketing and management technologies. With the greater proliferation of international trade it is essential for firms to be aware of trends in other markets. Entry of foreign competition and other threats might require the firms to re-examine their current product/market portfolio.

The traditional approach implicit in international business decisions has been criticised for the fragmented manner of resource allocations, neglecting the interdependencies of management decisions. Firms which adopt this attitude also suffer from the weakness of being reactive to the initiatives of others. For an effective international portfolio strategy, Wind and Douglasld] emphasised the need for an integrated approach within the overall context of corporate objectives, involving systematic, explicit ...