Portfolio analysis

Portfolio analysis (sometimes called the Boston Grid after the Boston Consultancy Group who developed it) helps you look in a different way at your portfolio of products and services. It can help you make decisions on where to invest more or less time and money, or to help you decide if you should remove a product or service from the portfolio. It is often useful to use this tool after SWOT and Other Player Analysis, particularly if you feel your organisation is spreading itself too thinly or if you feel that your portfolio of products and services needs some revitalisation. Benefits The Portfolio analysis can help you resist the urge to keep adding new products and services before the previous ones have fulfilled their potential. The tool introduces logic to the decision making process. Some organisations also use the tool very successfully to help them gauge distance travelled – if you repeat the exercise every three or four years, you will see how your organisation has shifted emphasis, adjusted to meet need or context and so on. Limitations Portfolio analysis was developed with an assumption that long-term profitability is the dominant goal, and responsibility to existing customers secondary – a balance of assumptions which does not sit easily for the charities, social enterprises and others in the voluntary and community sector. But provided one recognises this, it is still very useful, primarily for products/offerings which break even or have the potential to break even. Description of the diagram The diagram show a square divided into quadrants with each quadrant shaded a different colour. The x-axis shows the ‘Relative market share’ whilst the y-axis shows the ‘Market growth rate’. Explaining the portfolio analysis diagram 1.    The best place for your offering to be is bottom right. You have all the advantages of the highest volume provider (that is, economies of scale) and although continuing investment is necessary it will not be as high relatively as in two of the other quadrants. Action: Invest significant time and money and defend at all costs. 2.    The next best place to be is top right where once again you are market leader but the advantage is that the market is expanding rapidly so expansion is possible. This position has the disadvantage that you need to invest more heavily to make sure you get the majority of the new customers coming into the market  (in order to stay market leader), so the investment cost per customer is higher than in 1 above.  Action: Invest as heavily as possible. 3.    Top left is where you are in a rapidly growing market (and therefore have to invest heavily) but you are not market leader.  You may invest a lot of money and get nowhere.  Action: Assess carefully to see if heavy investment can get you to top slot. If your relative market share is low, you will need some very good reasons not to exit/divest. 4.    Apparently the worst position to be in is bottom left where you have low relative market share. Because these offerings have been around a long time, the organisation could be over loyal to them when exiting might be the best answer. If such action is not always clear in the commercial world, it is even less obvious in the nonprofit world where exiting may leave a cohort of vulnerable customers without help. Also the offering may be popular with donors. Therefore careful exit strategies are necessary. Action: Exit or reduce costs, raise income or donations to make them less of a drain on resources.

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