The main objective of the portfolio’s analysis is to identify the top performers and the methods to keep them as profit makers.
FREMONT, CA: In finance, portfolio analysis is the study of a specific portfolio with regards to its performance, ROI, and risks. The analysis is carried out with two objectives- minimizing risks and maximizing returns. The same objective is applied in marketing when using portfolio analysis.
The analysis is conducted in large multinational companies with various product portfolios to know their financial health. The main objective of the portfolio’s analysis is to identify the top performers and the method to keep them as profit makers.
Since some products will run in loss, companies need to ensure that they recognize these cash consuming portfolios so that it can be redesigned or discontinued.
Product Life Cycle Analysis for Portfolio Analyze
A product life cycle analysis establishes the different stages at which the product goes through. By mimicking the biological life cycle, it starts with an introduction, proceeds to growth, maturity, and ends with decline.
This is the beginning of the product in the market. Because the market share and the product’s growth rate are low in its early phase, promotion is an important objective instead of profit.
This is the prime stage of the product, where the growth rate is higher, and the market share also increases. Companies earn the optimal profit, and investors invest a lot during this phase of the product.
During this stage, the market growth rate comes to a halt, and the shares either remain the same or increase marginally. Competitors enter the market, and price wars begin, affecting the product’s margins and many resellers leaving the market.
There will be a decrease in market share in this phase, as consumers divert to new variants of the same product. Most products may be discontinued from the market, and companies may undergo cost-cutting or cut down on the marketing budget.
Advantages of Portfolio Analyze:
• Establishes the financial stability of the company along with product performance
• Acts as trend analysis for the product to estimate if it has a possible future in the market
• Guide for investors and shareholders for financial assessment of the portfolios
• It helps companies make product-related decisions, such as whether to continue, change, or discontinue products.