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Strategic Portfolio Planning Approaches

15 January, 2016 - 09:17

LEARNING OBJECTIVES

  1. Explain how SBUs are evaluated using the Boston Consulting Group matrix.
  2. Explain how businesses and the attractiveness of industries are evaluated using the General Electric approach.

When a firm has multiple strategic business units like PepsiCo does, it must decide what the objectives and strategies for each business are and how to allocate resources among them. A group of businesses can be considered a portfolio, just as a collection of artwork or investments compose a portfolio. In order to evaluate each business, companies sometimes utilize what’s called a portfolio planning approach. A portfolio planning approach involves analyzing a firm’s entire collection of businesses relative to one another. Two of the most widely used portfolio planning approaches include the Boston Consulting Group (BCG) matrix and the General Electric (GE) approach.