Portfolio Models

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GRIN Verlag, Feb 6, 2004 - Business & Economics - 28 pages
Research Paper (undergraduate) from the year 2003 in the subject Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media, grade: Degree: second upper (Germany =, University of Lincoln (-), 16 entries in the bibliography, language: English, abstract: The growing and brisk market during the 1950s and 1960s made companies to operate more and more businesses and led not only to larger and complex firms but also to a high number of divisions. The overall corporate strategy was therefore insufficient, especially when divisions led on to diversifications different strategies, business unit strategies, were required. In order to find out in which business a company should be in and how resources can be allocated amongst them, different portfolio analyses are developed in the 1970s. The idea goes back to the Portfolio Selection Theory from Markowitz (1959) in which a portfolio is described as an ideal mix of different securities. The portfolio analysis in this context can be described as a framework to analysis the balance of an organization’s strategic business units (Johnson and Scholes, 1999, p.186). The objective of this piece of work is to explain the two best-known portfolio analysis approaches: The Boston Consulting Group’s growthshare and growth-gain matrix and the General Electric Company business screen in regard to advantages and disadvantages, generated strategies, interdependence of products, opportunities for synergy as well as the problems which can occur when applying those models in practice. In the first chapter both models and the different strategies will be explained and definitions will be given. A comparison of both models in relation to their advantages and disadvantages can be found in the second chapter. In the third chapter the relevance of synergy will be discussed. Chapter four contains a GE matrix for Nestlé Waters and the validity of the possible strategies is critically evaluated. The conclusion can be found in chapter five.

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