Question

2.    What is the portfolio approach? How would multi-business companies find it useful? What are the limitations and weakness of this approach?

Answer 1

Portfolio Approach:

It is most powerful tool for company to drive growth by investing their capital into various portfolios of business.This approach is developed by Boston Consulting Group popularly known as BCG.

Usefulness in Multi business companies are:

1. It helps the managers to prioritise their resources on various units.

2.This approach focused on alloacting limited resources among various business in portfolio.

3. This approach helps to collect various information related to the units of portfolio.

4. it helps in knowing the differences as well as similarities between the various units in portfolio so that decision can be taken accordingly.

The limitation and weakness of this approach are:

1.Difficult to categorise the products as per the category in the portfolio of business.

2. This approach focus on existing products of company where they want to invest they do not consider new opportunity of products say new innovation.

3.The approach is based on forecasting but it can also prove to be wrong in future.