Product portfolio management


The product portfolio is represented by the product variety that a company offers on the market. The portfolio analysis proceeds from the assumption that different product categories bring the company different levels of sales and profits, that might sustain the results of other products.
It is a well known fact that most of the companies follow the 20/80 rule that says that 80% of the profits are generated by 20% of the products. Analyzing the product portfolio is crucial in taking the best strategic decisions, depending on the future perspectives each product category offers. For this analysis there are several models, the most used are those from Boston Consulting Group company.

BCG model

The BCG model has been created by the Boston Consulting Group and it has two variants(BCG1 and BCG2).
The first model, BCG1 was designed in 1970, according to the American economy conditions at that time, defined by dynamism and high stability of production techniques. The model is best suited for big companies, that can become market leaders for some products, but can also be applied to smaller companies that focus on becoming leaders of a market segment.

market growth
BCG1 is a matrix with 4 cells, analyzing 3 variables: The four cells of the matrix are the main product categories that can exist in a company's portfolio:
The second variant - BCG2 appeared in 1980 as an answer to the new economic environment defined by increasing competition. This new model allows a more flexible approach because it's not focused anymore on strict bordering of the products in the four matrix cells.

It is also designed as a 4 cell matrix built around two variables:
competitive differentiation

Besides bordering the products in four categories, the BCG2 matrix offers strategies for the company to adopt: