What is involved in product portfolio analysis?

Product portfolio analysis involves evaluating a company's products to determine their profitability, market share, growth potential, and strategic fit.

In more detail, product portfolio analysis is a strategic business tool that helps companies understand the dynamics of their product range. It involves a thorough examination of all the products or services a company offers, assessing each product's market performance, profitability, and potential for future growth. This analysis is crucial for making informed decisions about product development, marketing strategies, and resource allocation.

One of the most common methods used in product portfolio analysis is the Boston Consulting Group (BCG) matrix. This tool categorises products into four types based on their market growth rate and relative market share: stars (high growth, high market share), cash cows (low growth, high market share), question marks (high growth, low market share), and dogs (low growth, low market share). This categorisation helps companies identify which products to invest in, which to maintain, and which to phase out.

Another method is the GE-McKinsey matrix, which evaluates products based on market attractiveness and business unit strength. This nine-cell matrix provides a more nuanced analysis than the BCG matrix, allowing companies to make more strategic decisions about their product portfolio.

Product portfolio analysis also involves assessing the strategic fit of each product. This means evaluating whether a product aligns with the company's overall business strategy and objectives. For example, a product that is profitable but does not fit with the company's long-term strategic goals might be considered for divestment.

In conclusion, product portfolio analysis is a critical process that helps companies optimise their product range, allocate resources effectively, and align their product strategy with their overall business objectives. It involves a combination of financial analysis, market research, and strategic planning.