4. Portfolio Planning and Management

The portfolio of a company is the combination of all products and/or services that it offers to its customers. The position and role of each one in the overall company business, as well as their interrelation determine the portfolio structure.

The specific characteristics of SMEs development in the different European countries determine their different approach to setting up their portfolio of products and/or services during the years. In spite of this, a company has to search for balance by adjusting its structure to its own resources and market environment.

EXAMPLE: The development of SMEs in the Eastern European countries during the first years of the transition period was difficult and they had to take of work as long as it brought money into a company. The subsequent rapid growth also offered multiple opportunities and the companies made full use of them. Thus, over 70% of Bulgarian companies, for example, had a portfolio that wasn´t related to a defined business strategy and vision for long term development, and its structure reflected the market situation.

However, to stay competitive, small companies in all EU countries have had to re-think and optimize their activities; they have to search for new opportunities for their development. That is why they are being forced to create or update their strategy for the future development of the business, based on the prevailing conditions.

The assessment of the products and services, offered by the company, is very important when defining the vision for the future company development. It is of decisive significance for the correct portfolio building and its successful management.

Part of the questions you have to answer, in order to make a successful selection and build a product portfolio that is stronger compared to the individual products or services and that has long term market advantages, are:

  • What stage of their life cycle are you products in?
  • Do you produce the necessary products to place your company in the desired position on the market?
  • Do you have "useless" products?
  • What do you do when your competitor brings a new product on the market?
  • How do you decide whether to take a product off the market or introduce a new one?

The main criteria used to form a company´s portfolio are:

  • production performance of the existing equipment
  • unoccupied market niches
  • opportunities for quick profit.

However, you have to be always aware of the role and share of each product in your company´s portfolio.

The logical portfolio consistency shows how the products are integrated - production technologies, required knowledge and skills, benefits for customers, methods of marketing and selling. If your portfolio contains products resulting from accidental opportunities that the company did not want to miss, but they do not have direct relation to what you offer to your customers, you have to stop and think. And after that take them out of the portfolio unhesitatingly. This will reduce your costs and optimize processes in your business in a most natural and simple way. When built correctly, the product portfolio is a lot stronger compared to a single product. It involves synergies in production, marketing, distribution and opportunities for market expansion and achieving stable position. It brings serious competitive advantage.

Very often after setting up the initial product portfolio, it remains unchanged for years, despite the end of the life cycle for some products and market changes. This reduces the company´s competitive advantage and it has only two alternatives - to meet new market needs and therefore update its portfolio or to fail.