Portofolio

Portofolio

Introduction

It's the order in which senior managers generally prioritize their objectives. When you arrive at the step in the planning process where you're ready to set company objectives, the first suggestion you'll likely hear is "Let's make a profit." Even the not-for-profit institutions - governmental, educational, charitable - jump to develop their financial objective first. Like their for-profit cousins, they too have financial needs and constraints. And their financial needs are first on the minds of management when setting objectives. And if the financial objective is so important, how can management attain that objective? In the jargon of for-profit firms, "How can we make a buck?" The way you do it is you sell something to somebody. Simple as that. All businesses must exchange a product or a service for money. And since its selling something that produces a profit, the marketing or sales objective must support the financial objective. (Bradford and Duncan, 2008) And what is it you're going to sell to somebody? You need a product or service, don't you? So now the product or service objective supports the marketing/sales objective. Just as the marketing/sales objective supports the financial objective. Do you see how we're working our way down the hierarchy? (Bradford and Duncan, 2008)

Explanation

The basic postulates that are involved in portfolio analysis are common to all companies. Determining market attractiveness may be the most important part of portfolio analysis. The following are the ways to determine market attractiveness: (Lorenzen, 2006)

Market growth

Market size

Market profitability

Intensity of competition in the market

Pricing trends

Segmentation

The risks involved in returns in industry

The distribution structure; that is, wholesale, retail or direct

Available opportunities for differentiating between products and services

Accessing competitive strength of the company is also another important strategy of portfolio analysis. The following points must be considered while analyzing a portfolio: (Lorenzen, 2006)

Market share

Relative brand strength

Distribution strength

A portfolio analysis helps optimize investments and locates relatively productive business opportunities. The tools of portfolio analysis help to maintain a balance in the portfolio. Through the analysis, performance of the company over a period of time can be evaluated; thus, plans for the future can be formulated.

The company should try to understand and determine as to what is in the market that they can exploit. They need to understand to which market they should be attracted. There are various factors that make a certain industry ...