Product Portfolio

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 market 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.

• 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.

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 revenue 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 stakeholders to have insight into its portfolio and business operations.

The process of maintaining a successful portfolio requires effective portfolio management. 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.

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 cow column accommodates the product with high market share and low growth rate. Finally, the question mark column connects with the products having a high growth rate but low market share.

Let's explain the product portfolio example using Samsung's product mix. Samsung is a South Korean business conglomerate. 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.

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 flow for day-to-day operations and expenses, 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 awareness.

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 –

• Product Differentiation
• Minimum Viable Product
• Substitute Products