CORPORATE PORTFOLIO ANALYSIS – MEANING

Portfolio Analysis is simply a portfolio analysis that is used for

competitive analysis and strategic planning in various small to large
companies including multi-product and multi-business firms.

In this case, we can take an example of a diversified company that can

divert its business from one business to another where faster growth is
possible. This will help to get maximum returns or to achieve its
corporate-level objectives in an optimal manner.
DEFINITION & MEANING OF CORPORATE PORTFOLIO
ANALYSIS:-
It can be defined as a set of techniques that helps strategists
in taking strategic decisions with regard to individual products
or businesses in a firm’s portfolio.
In this, each segment of company or organisation’s product
line is evaluated. This includes:
a. sales
b. production cost
c. market share
d. potential market share.
Evolution of Corporate Portfolio Techniques
Evolved in Mid 1960
This technique was evolved somewhere between mid 1960s.

Importance of Corporate Portfolio Analysis

1. To analyse the current business portfolio.
2. To decide SBU investment distribution.
3. To add new products or services or businesses.
4. To decide product retention or removal.
Corporate Portfolio Analysis Techniques:-
Below is the list of various methods and techniques used for
Corporate Portfolio Analysis.
1.Technological portfolio
2.BCG Growth-Share Matrix
3.Hofer’s Product-Market Evolution Matrix
4.GE Multifactor Portfolio Matrix
5.Market Life Cycle-Competitive Strength Matrix
6.Ansoff’s Product-Market Growth Matrix
7.Arthur D. Little Portfolio Matrix
BCG Matrix or Product Portfolio:-
This model was proposed by Boston Consulting Group.
Two factors involved:
I. Relative market share
II. Market Growth Rate
BCG matrix model involves four scenario:
1. Star
2. Cash Cow
3. Dogs
4. Question Mark: also called problem children
GE Nine Cell Model:-
It is also called McKinsey Matrix or General Electric’s 9 Cell
Model.
This is a Strategic management tool similar to the BCG matrix.

Two factors involved in nine cell GE model:-

1.Industry attractiveness
2.Business Strength

Three Segments in 9 cell matrix model:-

1.Invest (Expand, Grow)
2.Select (Earn, Hold)
3.Harvest (Divest)
How To Use GE Matrix?
1. Determine the industry attractiveness of each SBU
Calculate the market attractiveness in which each SBU
operates. Remember, this is a subjective estimate based on
your understanding of the SBUs industry or sector.
Score the SBUs industry by looking at factors like:
Market size
Industry profitability
Market growth potential
Industry segmentation
Market profitability
Differentiation
Market growth rate
Level of competition
Important note: The scale you use to score SBU strength and
industry attractiveness will depend on your needs. Most
businesses use a 1-10 scorecard, but you may want to use a
different range when assigning values.
2. Determine the competitive strength of each SBU
You’ll then repeat this process for each company in your
portfolio. Look at the strength of the business unit and its
competitive position in the market.
Factors you can consider when working out the strength of a
business unit:
•Sustainable competitive advantages (use VRIO analysis)
•Brand equity
•Customer loyalty
•Market share
•Internal competencies
•Strength of the value chain (use value chain analysis)
•Production capacity
•Product lines
•Pricing and cash flows
•Profit margin compared to competitors
Important note: Different factors have different levels of
importance. When calculating industry attractiveness and
business strength scores, you’ll need to weigh numerous
factors to reflect this.
3. Plot the information on the GE Matrix
Next, plot the values for each strategic business unit on your
Matrix. Use the market attractiveness score to plot your Y-axis
position and the business strength score to plot your X-axis
position.
The location of each SBU on the 3x3 chart will indicate
whether the company should grow, hold, or harvest specific
business units.
4. Identify the future direction of each SBU
The GE Matrix only provides a view of the current state of
SBUs in a portfolio and doesn’t account for other variables
that may impact a business's viability.
This means that teams that use the GE Matrix must analyze
business units in more detail to understand all strategic
implications.
Using different strategic analysis tools, such as SWOT analysis
, Porter’s 5 Forces, or PESTEL analysis, could help you analyze
internal and external environmental factors. This will also help
you to identify potential risks in the future.
5. Choose where to invest and focus your attention
Once you have a picture of your portfolio mapped out on the
GE Matrix, you’ll still need to answer some critical questions
before making decisions about SBUs.
For example, how much money should you put into a specific
business unit? Does investing in these SBUs align with your
long-term strategy? Which parts of a particular SBU should
you invest in?

As Michael Porter, the father of the modern business strategy,

says, “The essence of strategy is choosing what not to do”.
At this point, you should clearly understand what your
organization will focus on. This will help your organization to
stay on the right track and prevent wasting resources on
misaligned efforts.
6. Turn insights into results
With a clear idea of direction and new priorities, you should
take those insights and turn them into an actionable strategic
plan.
A strategy execution platform like Cascade can streamline
the process of communicating new goals, strategizing, and
executing strategic initiatives. It can also help your
organization ensure performance and align your portfolio
strategy with the company’s high-level strategy.
Advantages of GE Matrix:-
The advantages of GE Matrix are:
1. A simplified approach to portfolio analysis and investment
allocation decisions.
2. Highly replicable and consistent framework.
3. Applicable across different industries.
4. An efficient method of determining strategic paths for
multiple SBUs.
5. Helps measure and map the strategic position of SBUs.
6. Helps understand which businesses are making a profit
and which aren’t.
Limitations of GE Matrix:-
The possible limitations of GE Matrix are:
1. The GE Matrix is only a snapshot of your portfolio’s
performance.
2. It relies on subjective estimations of market attractiveness
and business strength.
3. Lacks nuance in differentiating between SBUs.
4. Teams may need to do more research before they can
make investment decisions.
5. May not be suited for emerging or rapidly-evolving
industries.
What is gap analysis?

A gap analysis is a method of assessing the performance of a

business unit to determine whether business requirements or
objectives are being met and, if not, what steps should be
taken to meet them.

A gap analysis may also be referred to as a needs analysis,

needs assessment or need-gap analysis.
The "gap" in the gap analysis process refers to the space
between "where we are" as a part of the business (the
present state) and "where we want to be" (the target state or
desired state).
Types of Gap Analysis

Market Gap Analysis Also called product gap analysis, market

gap analysis entails making considerations about the market
and how customer needs may be going unmet. If a company
is able to identify areas where product supply is not meeting.

consumer demand, then the company can take measures to

personally fill that market gap. This type of analysis may be
performed by external consultants who have more expertise
in these areas of business in which the company may not
currently be operating.
 Strategic Gap Analysis Also called performance gap analysis,
strategic gap analysis is a more formal internal review of how
a company is performing. The analysis often entails comparing
how a company has done against long-term benchmarks such
as a five-year plan or a strategic plan.

A strategic gap analysis may also be performed to compare

how a company is faring against its competitors. This type of
analysis may unearth ways that other companies are utilizing
personnel or capital in more strategic, resourceful ways. This
type of information may be hard to come by, especially if
departed employees have signed nondisclosure agreements
and the company does not publicly disclose much information
about processes.
Financial/Profit Gap Analysis:-
A company may choose to directly analyze where its company
may be falling short compared to competitors by looking
specifically at financial metrics. This may include pricing
comparisons, margin percentages, overhead costs, revenue
per labor, or fixed vs. variable components. The ultimate goal
of a profit gap analysis is to determine areas in which a
competitor is being more financially efficient. This information
can then be used in further, broader gap analysis types.
Skill Gap Analysis
Instead of looking at the financial aspects of a company, a
business may choose to look at the human element instead. A
skill gap analysis helps determine if there is a shortfall in
knowledge and expertise with current personnel. A skill gap
analysis must clearly define the goals of the company, then
map how current laborers may fit into that design. A skill gap
analysis may lead to the recommendation of simply training
existing staff to incur new skills or seeking outside expertise to
bring in new personnel.
This type of analysis is especially important for innovative
companies that must rely on having direct skill sets to
continue to be competitors (or leaders) in their industry. In
addition, skill gap analysis is critical for small companies that
must rely on a smaller staff to operate. In this case, individuals
must often have diverse, flexible talents that can be useful in
Compliance Gap Analysis
Often leveraging internal audit functions, a compliance gap
analysis evaluates how a company is faring against a set of
external regulations that dictate how something should be
getting done. For example, a company may internally evaluate
its accounting and reporting functions in advance of seeking
an external auditor to provide an opinion on its financial
statements.
Compliance gap analysis tends to be preventative and
defensive as opposed to more strategic forms of gap analysis.
For example, instead of performing a gap analysis to attempt
to gain a greater percentage of market share, compliance gap
analysis often has the intention of meeting regulations,
avoiding fines, meeting reporting requirements, and ensuring
that external deadlines can be met successfully.
Product Development Gap Analysis
As a company builds new products, gap analysis can also be
performed to analyze which functions of the products will
meet market demand and where the product will fall short.
This type of gap analysis is often associated with the
development of software products or items that take a long
time to develop (in which the market demand may have
shifted).
During product development gap analysis, a company may
also evaluate which aspects of the product or service have
been successfully implemented, delayed, intentionally
eliminated, or still in progress. With a blend of multiple types
of gap analysis above, the company can then perpetually
evaluate how its product plan is changing and whether it has
the internal resources to meet the internal gaps needed for
product development completion.
Benefits of Gap Analysis
Because gap analysis can be used in an assortment of ways, it
carries with it a wide variety of benefits. Each benefit listed
below may pertain to only one specific type of gap analysis.
Still, companies performing gap analysis may experience:
Improved profitability. Companies that assess gaps and
preemptively determine shortfalls can be better prepared to
incur spending at optimal times, have resources on hand
(instead of having to pay extra capital to secure later), and run
more efficiently.
Better manufacturing processes. Realizing and preventing
gaps from building in the manufacturing process leads to
stronger production, more efficient delivery logistics, raw
materials being on-site at the correct location when they are
needed, and the avoidance of bottlenecks due to any shortfall
along the process.
Happier employees and customers. Instead of being
reactionary to employee or customer needs, companies that
perform gap analysis can address these potential issues
before they strain relationships or cause individuals to turn to
competitors.

Operational efficiency. By better understanding where it may

not be operating well, a company can make changes to
improve day-to-day functions.

Decreased risk for long-term endeavors. By identifying the

resources needed and potential shortfalls, companies can
plan for gaps and identify problems before they occur.
What is the Ansoff Model?
Also referred to as the Ansoff matrix, due to its grid format,
the Ansoff Model helps marketers identify opportunities to
grow revenue for a business through developing new
products and services or "tapping into" new markets. So it's
sometimes known as the ‘Product-Market Matrix’ instead of
the ‘Ansoff Matrix’.

The Ansoff Model's focus on growth means that it's one of the
most widely used marketing models. It is used to evaluate
opportunities for companies to increase their sales through
showing alternative combinations for new markets (i.e.
customer segments and geographical locations) against
products and services offering four strategies as shown.
How to use the Ansoff Matrix:-
Strategic questions that can be answered using the matrix
include:
Market Penetration: How to sell more of your existing
products or services to your existing customer base?
Market Development: How to enter new markets?
Product and Development: How to develop existing products
or services.
Diversification: How to move into new markets with new
products or services, increase your sales with your existing
customer base as well as acquisition.
To evaluate the suitability of these strategies, issues to
consider for each of these:
Market Penetration: change your opening hours of your
store, reduce order processing times, showcase entire
product portfolio etc.
Market Development: Does your research on your market
share in your existing sectors back up potential demand for
you to considering entering new markets? Considering search
intent for services in different markets, for example, using
Google Keyword Planner or Ubersuggest can also inform this.
Can your company support this with existing resources?
Product and Development: Can you you develop new
products, perhaps using cheaper manufacturers, improved
quality, updated packaging. Again market research to ask
potential customers and influencers for feedback can help
here.
What Is Strategy Implementation?
Strategy implementation means turning a business plan into
actionable steps to achieve your objectives. It’s how you get
things done in your company to keep and maintain your
bottom line. Implementing strategy means knowing your
short- and long-term business goals, company structure,
available resources, and market conditions.
What Are the Factors That Support Strategy Implementation?
A successful strategy implementation depends on five
essential components:
1. Human Resources
You cannot implement a strategy without a workforce.
Depending on your company type and size, the workforce can
be a sole proprietor, an in-house strategy team, or an
outsourced strategy execution expert. You need the right
people with the right skills to act on your strategic plan.
Consider upskilling your team to sharpen their strategy
implementation skills and competencies.
2. Time and Money
Business strategy implementation needs a budget to include
salaries, incentives, and strategy execution software
subscriptions. You also need to allocate adequate time for
each step of your business strategy, plus room for
3. Clear Organizational Structure
Outline who is responsible for which step of your
implementation strategic planning process. Know who
everyone is accountable to, and open communication from
top management to the lowest tier. Your team members must
be completely aligned with the strategy. Otherwise, you risk
poor communication and resistance to change, which slow
down your business.
4. Strategy Implementation Tools and Systems
An Organization can choose to execute its strategy through
the objectives and key results (OKR) framework. This
framework has been used successfully by tech titans of our
generation like Google, and Intel, etc. Companies can use an
agile OKR software like Profit.co to implement the OKR
framework and execute Strategy. The strategy
implementation tools should be affordable, quick to deploy,
5. Company Culture
Cultivate an organizational culture that values everyone’s
input into business processes. You also want your team to be
responsible, accountable, and motivated to contribute to the
company’s mission. Implementing a strategy in a positive
corporate atmosphere where employees understand their
roles is much easier.
What Are The 3 C’s of Implementing Strategy?
Business leaders shoulder the burden of implementing
strategy from creation to execution. To guide this process,
keep the 3Cs of strategy implementation below:
1) Clarity
A high-level understanding of your business strategy isn’t
enough for successful implementation. Clarify your strategy
for everyone from the C-suite to the frontline staff. Use simple
language and avoid corporate jargon. Explain your plan, how
you’ll do it, and everyone’s role. This way, your team
understands and resonates with your strategy.
2) Communication
When implementing a strategy communication is vital for its
success. The secret is to use different mediums to get your
plan across. For example, use internal message boards,
podcasts, meetings, blogs, and other channels to keep your
What Are the Steps Needed for Effective Strategy
Implementation?
Let’s look at the practical steps involved in the strategic
implementation process.
Step 1: Goal Setting
The first step of strategy implementation is defining your
goals. This is where the OKR framework plays a critical role in
your strategy. It also includes tracking your outcomes to
reward your team and course-correct over time. OKRs are not
tied to performance reviews or compensation but instead
linked to your company’s mission and vision. An OKR typically
has three or five objectives, with up to five measurable results
for each purpose. OKRs tie your company goals to your
overarching company vision in measurable and quantifiable
steps.
Step 2: Human Resource Planning
Step 3: Task Delegation
Always start with the big-picture strategy implementation
plan, then break it down for your team using your
OKR framework and timeline. Explain each task and its role in
the strategy, then set a deadline to keep your team on target.
With this approach, you avoid micromanagement and give
your team more autonomy to manage their workloads as long
as they meet the deadline.
Step 4: Actual Implementation
Once your team knows what they’re supposed to do, give the
green light and begin your strategy implementation. This is
the hardest part of the process since you must be available to
answer questions and offer guidance at every stage as a
manager. With the proper communication channels in place,
you can check in with your team, track their progress, listen to
feedback, and mark significant milestones at every step.
Step 5: Adjust and Revise Your Strategy
Implementing a strategy is a process that brings unforeseen
challenges, but that doesn’t mean you stop altogether. You
may discover that you need to redefine your goals or allocate
more of your budget. You can also adjust your deadlines or
reassign tasks to other team members until implementation is
complete. A manager must be attentive, thoughtful, and open
to change throughout strategy implementation. After all, this
is how you learn about your strategy, team, and capabilities.
Step 6: Clarity on Completion
Say you’ve successfully managed the implementation process,
and your project is complete. In that case, check in with your
team to ensure you’ve met all your goals. Gather as much
information as possible about the implementation process
and agree on the project’s output. This helps you prepare
reports about the implementation, the strategic planning
Step 7: Implementation Review
Doing a retrospective once you finish implementing the
strategy is always helpful. The following questions offer clarity
into your process:
Did you set the right goals?
Did you achieve those goals?
Which goals did you miss or fail to implement?
Which challenges and roadblocks arose during
implementation?
Which challenges were avoidable or could be anticipated?
How did you overcome these challenges?
What lessons did you learn from the implementation process?
Note: No manager wishes for failure, but flawed strategies are
more common than you think. Even global brands like Kodak
and eBay have suffered from failed business strategies. Use
each challenge as a learning experience to improve future
Common Causes of Strategy Implementation Failure
To avoid wasting resources and opportunities, managers must
understand the common underlying reasons why
implementing strategy can go awry.
These include
Misunderstanding the Strategy
Employees and managers must be on the same page right
from the start and have transparent, effective communication
channels. This allows for clarity and ownership, which
improves motivation and empowerment when implementing
strategy. Some strategies are also confusing or overwhelming.
The OKR approach breaks down your goals into actionable
portions for a user-friendly strategy.
Separating Strategy from Core Business Functions
Implementation of strategic planning involves budgeting,
human resource management, employee compensation,
customer relations, and many other business functions.
Ensure that you link your strategy to these operational goals
right from the start.
Prioritizing Everyday Functions Over Strategy
Business leaders often focus on daily business operations and
overlook or dismiss their strategy. For example, strategy
implementation may come up at meetings once or twice a
month; then, the managers ignore it. If your strategy remains
at the back of your mind, it’s easy to forget as you work on
the bottom line.
What is strategic control?
Strategic control is a way to manage the execution of your
strategic plan. As a management process, it’s unique in that
it’s built to handle unknowns and ambiguity as it tracks a
strategy’s implementation and subsequent results. It is
primarily concerned with finding and helping you adapt to
internal or external factors that affect your strategy, whether
they were initially included in your strategic planning or not.
The various components of the strategic control process
generate answers to these two questions:
Has the strategy been implemented as planned?
Based on the observed results, does the strategy need to be
changed or adjusted?
In many senses, strategic control is an evaluation exercise
focused on ensuring the achievement of your goals. The
process bridges gaps and allows you to adapt your strategy as
Six Steps Of The Strategic Control Process
Whether your organization is using one or all four of the
previous techniques of strategic evaluation and control, each
involves six steps:
1 Determine what to control.
What are the organization’s goals? What elements directly
relate to your mission and vision? It’s difficult, but you must
prioritize what to control because you cannot monitor and
assess every minute factor that might impact your strategy.
2 Set standards.
What will you compare performance against? How can
managers evaluate past, present, and future actions? Setting
control standards—which can be quantitative or qualitative
—helps determine how you will measure your goals and
evaluate progress.
3.Measure performance.
Once standards are set, the next step is to measure your
performance. Measurement can then be addressed in
monthly or quarterly review meetings. What is actually
happening? Are the standards being met?
4.Compare performance.
When compared to the standards or targets, how do the
actuals measure up? Competitive benchmarking can help you
determine if any gaps between targets and actuals are normal
for the industry, or are signs of an internal problem.
5.Analyze deviations.
Why was performance below standards? In this step, you’ll
focus on uncovering what caused the deviations. Did you set
the right standards? Was there an internal issue, such as a
resource shortage, that could be controlled in the future? Or
an external, uncontrollable factor, like an economic collapse?
6.Decide if corrective action is needed.
Once you’ve determined why performance deviated from
standards, you’ll decide what to do about it. What actions will
correct performance? Do goals need to be adjusted? Or are
there internal shifts you can make to bring performance up to
par? Depending on the cause of each deviation, you’ll either
decide to take action to correct performance, revise the
standard, or take no action.