A product portfolio refers to the collection of all the products or services offered by a company. This includes all product lines, individual products within those lines, and variations of those products. It’s essentially a snapshot of all the market offerings a company has at a given point in time.
Companies often manage their product portfolio through a series of strategies that involve adding new products, discontinuing underperforming products, or revitalizing existing products to meet changing market demands or leverage new opportunities.
One popular tool used for product portfolio analysis is the Boston Consulting Group (BCG) Matrix. The BCG Matrix plots products based on their market growth rate and market share, classifying them as “stars” (high growth, high share), “cash cows” (low growth, high share), “question marks” (high growth, low share), or “dogs” (low growth, low share).
- Stars: These are products in high-growth markets with a high market share. Stars are seen as market leaders but require investment to sustain their growth. Once the market growth slows, they become cash cows.
- Cash Cows: These are products with a high market share in low-growth markets. These products are often mature and profitable, generating more cash than is needed for their upkeep.
- Question Marks: These are products with a low market share in high-growth markets. They require a lot of cash to maintain and increase their market share. Decisions need to be made about whether to invest in building market share or to phase out these products.
- Dogs: These are products with a low market share in low-growth markets. These are usually products that could be phased out, although they can still be profitable and contribute to overall revenue.
The aim of this portfolio planning approach is to balance the usage and generation of cash within a business and to invest in future growth sectors while optimizing profit from mature products.
Example of Product Portfolio
Let’s consider an example using the popular consumer electronics company Apple Inc.
Apple’s product portfolio includes several product lines, each with different products and variations:
- iPhone: Including different models such as the iPhone 13, iPhone 13 Pro, iPhone 13 Pro Max, and iPhone 13 mini. Each model comes in different variations based on storage capacity and color.
- Mac: Including various laptops and desktops such as MacBook Pro, MacBook Air, iMac, Mac Mini, and Mac Pro.
- iPad: Including the standard iPad, iPad Mini, iPad Air, and iPad Pro. Each has different sizes and storage capacities.
- Apple Watch: With different series and variations.
- Services: Apple Music, iCloud, Apple TV+, Apple Arcade, Apple Fitness+, and more.
- Other Products: Such as the HomePod mini (smart speaker), Apple TV 4K (media player), AirPods (wireless earbuds), and more.
In terms of the BCG Matrix:
- Stars could include products like the iPhone and Services (Apple Music, iCloud, Apple TV+, etc.), which have a high market share in high-growth markets.
- Cash Cows might be products like the MacBook Pro and iPad, which are mature products with a high market share in markets with relatively lower growth.
- Question Marks could be newer or less dominant products like the HomePod mini, which operates in a high-growth market (smart speakers), but with a lower market share.
- Dogs might include products like the Apple TV 4K, which has a low market share in a relatively low-growth market.
These are hypothetical categorizations and can vary based on the specific market conditions and strategic considerations of the company. Companies typically aim for a balanced portfolio, with products in each category to ensure long-term stability and growth.