PORTFOLIO MANAGEMENT

PORTFOLIO MANAGEMENT - The Business Portfolio For firms...

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The Business Portfolio For firms with different SBUs, planning also includes allocating resources among the businesses Each SBU is a separate profit center within the larger corporation Each SBU is responsible for its own costs, revenues, and profits Portfolio Management The range of products owned by a large firm is called a business portfolio Portfolio analysis allows a firm to assess the potential of its products and businesses – BCG Growth-Market Share Matrix
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The Boston Consulting Group’s Growth-Share Matrix 3 ? 10x 4x 2x 1.5x 1x 10x 4x 2x 1.5x 1x 20% 20%- 18% 18%- 16% 16%- 14% 14%- 12% 12%- 10% 10%- 8% 8%- 6% 6%- 4% 4%- 2% 2%- 0 Market growth rate Relative market share Stars Cash cow Question marks Dogs ? ? ? 5 4 2 1 6 8 7 .5x .4x .3x .2x .1x .5x .4x .3x .2x .1x BCG Matrix Method focuses on the potential of a firm’s existing successful products to generate cash that the firm can then use to invest in new products New products are chosen for their potential to become future cash generators Two dimensions: – Market growth rate – Relative market share
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