Product Portfolio

Product Portfolio is a set of all products, product lines or other groupings within a business unit or business division. Products can include existing products, which may be at various phases of their own life cycles, as well as incoming products (those anticipated, actually in development, or in the launch phase). In smaller organizations, a single product or product line may in fact comprise the entire portfolio.

Common approaches to organize products are:

• Organize by markets on which the products focus
• Organize by types of products produces
• Broad functions; themes of the products or the precise needs of the market being met by those products and how diverse are those needs
  • e.g. if GE produces am light bulb and a tube light - they can be put in the same portfolio
  • However, if GE also produces medical devices or has financial services division with financial products - which will have to be in their own portfolio independently
• Types of development methods used to produce

Importance of Products Portfolio to Businesses

1) Product Innovation: It is very important to follow the strategy of having a Product Portfolio and analyzing it in the regular intervals in order to plan and come up with the new and innovative line of products to be offered to the target market. It helps in defining the types and nature of products that are liked and preferred by the customers and with the experience and knowledge, launch the new line of products that are not only innovative and novel in ideation but matches the taste and preferences of the target market.

2) Tax Benefits: Managing and analyzing the Product Portfolio on the regular basis helps to structure the investments and all the other financial elements of the company resulting in the various tax benefits.

3) Aligns projects with the businesses strategy: It is very important that the product offerings and their revenue generations match and align with the long-term vision of the company and the business strategy. As then only the company will be able to accomplish its aims and objectives of higher sales, elevated profits, competitive advantage, and increased market share. Having the proper management of the Product Portfolio helps the management to align the existing and projects in the pipeline with the overall business strategy and vision of the company.

4) Visualize the entire products-line: Studying and analyzing the operations, revenue generation, and other facets of each and every product on an individual level offered by the company can be very cumbersome and will not help to draw comparative study effectively. But with the Product Portfolio in place, all the key members of the management are able to visualize the entire portfolio of the all the old, existing, and future products having a broader spectrum.

5) Effective allocation of resources: Having and managing the Products Portfolio helps in allocating the various resources of the firm such as finances, human resources, and manufacturing plants amongst others in an effective manner. It helps in figuring out the products that are working as the cash cows for the companies, the products that are capable for higher market share but require the boost from the management, and the products that are redundant in nature and needs to be taken off from the market.

6) Data for the key members of the management: It helps providing the crucial and important data to the key members of the management that enlightens them about the performance of the products in the market, revenue generation by the each product, market share, customer preferences, and requirement of any sort of tweaking or innovation in any products amongst others that helps with the planning and execution of the next plans and strategies of the business.

7) Cash flow: The company requires the regular flow of cash for the day to day business operations such as paying overheads, staff salaries, and more along with the money required for the investments in the existing and future line of the products. And with the proper planning and administration of the Products Portfolio, the cash flow issues of the company are sorted out as it helps to determine the products that bring the maximum revenues and the company will allocate the maximum resources on the same.

8) Synergy within the internal team: All the products offered by the company and their operations are not managed by the single person, but they are managed by various departments and individual teams formulated by the management of the firm. This case is mainly applicable to the large corporate firms that have a huge and varied line of products in the market. And with the proper Products Portfolio in place, there are various team meetings and discussions resulting in all the members on the same page and well aware about the overall business strategy and operations of the firm having a required synergy to attain the long-term business aims and objectives.

9) Proper selection of the target industry: Products Portfolio helps the management to figure out on why the certain lines of products are performing extremely well working as the cash cows for the firm whilst some of them not matching the required and envisioned plans and objectives. And if the later is having the issue of the products not targeted and promoted to the required target market and audience, the elements, and strategies of the Products Portfolio helps to iron out this problem.