Product Portfolio Meaning Examples Benefits Analysis

Product Portfolio Meaning

A business can concentrate on producing single or multiple products directed towards the same or different target marketTarget MarketA target market consists of different groups of individuals, households, and organizations towards which a company aims to offer its products and services.read more based on their strategies. In addition, there are decision-making tools like BCG Matrix—or Boston Consulting Group Matrix entities use to whether to keep, sell or invest more in the product; thereby, entities can create a balanced portfolio.

Key Takeaways

A product portfolio represents all products offered by a company. The items in the portfolio can be related or unrelated.A business can concentrate on producing single or multiple products directed towards the same or different target market based on their strategies.Like an informative tool, it helps management in the decision-making process regarding product development.Its benefits include spread risk, innovation, enriching cash flow, following business strategy, optimum resource allocation, and brand awareness.

Understanding Product Portfolio

A product portfolio is an informative tool disclosing the products by an entity. It contains all products by the entity regardless of products’ performance and revenueRevenueRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.read more contribution. An efficient portfolio will have the right number of products exhibiting inclination toward the business strategy. In essence, it helps the business and its stakeholdersStakeholdersA stakeholder in business refers to anyone, including a person, group, organization, government, or any other entity with a direct or indirect interest in its operations, actions, and outcomes.read more to have insight into its portfolio and business operations.

The process of maintaining a successful portfolio requires effective portfolio managementPortfolio ManagementPortfolio management involves overseeing a set of investments, including securities, bonds, exchange-traded funds, mutual funds, cryptocurrencies, etc., on a personal or professional levelread more. It includes the strategic selection of markets, products, and technologies to invest in, proper allocation of scarce resources, and the selection of appropriate development projects. Furthermore, it is also important to manage the resource across multiple projects.

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Product Portfolio (wallstreetmojo.com)

Every organization wants to excel in the market, and having a large portfolio is one of the techniques to achieve it. Product portfolio design and planning have a profound impact on the success in competition. An effective portfolio maximizes the scope for profit. Every product in the collection may not be having equal market share or growth rate; they perform differently. Various tools are used to gauge the performance of the business’s portfolio. Primarily, it segregates the products based on their market performance, like the best product and worst product.

BCG matrix portrays this scenario. The products falling in the star column of the matrix are the ones with high market share and growth rate, the dog column of the matrix exemplifies low market share and growth rate, cash cowCash CowA cash cow is a company or a business unit that provides a consistent cash flow stream by capturing significant market share and requires a relatively lower capital investment and maintenance cost. In addition, products generated are standard and have consistent demand with higher returns at a lower risk.read more column accommodates the product with high market shareMarket ShareMarket share determines the company’s contribution in percentage to the total revenue generated within an industry or market in a certain period. It depicts the company’s market position when compared to that of its competitors.read more and low growth rate. Finally, the question mark column connects with the products having a high growth rateGrowth RateThe Growth rate formula is used to calculate the annual growth of the company for a particular period. It is computed by subtracting the prior value from the current value and dividing the result by the prior value.read more but low market share.

Product Portfolio Example

Let’s explain the product portfolio example using Samsung’s product mix. Samsung is a South Korean business conglomerateConglomerateA conglomerate in business terminology is a company that owns a group of subsidiaries conducting business separately, often in distinct industries. It reflects diversification of operations, product line and market to allow business expansion.read more. They provide products and services across the world primarily through its subsidiaries. One of the supreme strategies followed by Samsung is technological innovation. Successful innovations backed by superior technology and design helped Samsung deliver innovative products and gain an influential position in the consumers’ minds. One prime fact is that Samsung’s portfolio influences what businesses can and should accomplish with smartphones.

The product mix of Samsung includes consumer electronics, electronic components, telecommunications equipment, medical equipment, ships, home appliances, automotive, chemicals, telecommunications equipment, semiconductors, solid-state drives, etc.

The service mix of Samsung includes entertainment, advertising, construction, financial services, hospitality, information and communications technology, medical and health care services, retail, shipbuilding, semiconductor foundry, etc.

Benefits of Product Portfolio

Producing various product serving diverse customer bases offer several benefits to companies. Some of the benefits are the following:

Spread risk: Having a broad category of products helps businesses collect revenue from different markets. If one product fails, the other product wins.Innovation: A diversified portfolio can ignite innovation, rebrand, and strategize its business. Product portfolio analysis generates ideas about new opportunities and improvisations.Cash flow: Every organization needs a consistent cash flowCash FlowCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. read more for day-to-day operations and expensesExpensesAn expense is a cost incurred in completing any transaction by an organization, leading to either revenue generation creation of the asset, change in liability, or raising capital.read more, and a well-established and structured portfolio helps companies achieve it.Accordance with business strategy: A well-portrayed product assortment helps management check whether the business operations and investment streamline with the business strategies.Optimum resource allocation: When a company produces various products and operates in different sectors, it optimizes resource allocation. Reviewing the cash flow associated with different products helps in the decision-making process, like whether to continue the product or not and to assign resources to various uses.Brand awareness: When a business offers a wide array of products to the various target markets, it will earn them a higher market share, increase sales, and contribute to brand awarenessBrand AwarenessBrand Awareness is a measure of consumer’s brand recall and brand recognition.read more.