Portfolio planning is the process of evaluating and managing a company’s collection of business units, products, or investments to ensure optimal performance and strategic growth. It helps businesses allocate resources effectively, balance risk, and maximize profitability.
Two Steps in Business Portfolio Planning
- Analyzing the Current Portfolio – Evaluating the company’s existing business units or products to assess their performance, market position, and potential.
- Developing a Growth Strategy – Deciding how to allocate resources among different business units (e.g., invest, maintain, harvest, or divest) to optimize growth and profitability.
Why Each Step is Important
- Analyzing the Current Portfolio – Helps identify which business units are strong (stars, cash cows) and which are underperforming (question marks, dogs). This ensures informed decision-making based on real data rather than assumptions.
- Developing a Growth Strategy – Ensures that resources (capital, manpower, marketing) are allocated efficiently to maximize returns. It helps businesses focus on high-growth opportunities while phasing out weak or unprofitable segments.
By following these steps, companies can maintain a balanced and competitive portfolio, driving long-term success.
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