Product Portfolio

Updated on March 19, 2024
Article byPrakhar Gajendrakar
Edited byPrakhar Gajendrakar
Reviewed byDheeraj Vaidya, CFA, FRM

Product Portfolio Meaning

A product portfolio refers to the complete list of products offered by a company. For example, if an entity sells laptops and smartphones, the entity’s portfolio contains laptops and smartphones. Its elements change if the entity adds a new product or removes an existing product in the offering.

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 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 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 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.

Product Portfolio

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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 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 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 more but low market share.

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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 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:

Benefits of Product Portfolio

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Frequently Asked Questions (FAQs)

What is product portfolio analysis?

The portfolio analysis process is one of the main critical factors for success associated with product development. It examines complete elements of the portfolio, including the performance of various products and their compliance with business objectives. Furthermore, it gives input to decisions regarding revisions, updates, and discontinuation of products produced and commercialized.

What is a product portfolio strategy?

Product portfolio strategy refers to the plan and programs developed by the management to develop products that match the company objectives, coordinate with existing offerings and market requirements, and help them achieve company goals. It focuses on assigning the resources to different products development, ensuring its proportionality with its priority. An effective strategy results in increased revenue profitability opportunities and reduces product failures.

What is the importance of a product portfolio?

It lists the complete set of products sold by an entity. Hence providing information to various stakeholders. In addition, it will help ensure that the products are in line with the company objectives and strategies, optimize cash flow and resource allocation, etc.

This has been a guide to what is Product Portfolio and its Meaning. Here we discuss the benefits of product portfolio, their explanations, and example. You may learn more about financing from the following articles –

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