Functions of portfolio: Difference between revisions
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Main '''functions of portfolio''' analysis [[method]] involves [[identification]] and [[evaluation]] of all products or [[service]] groups offered by [[company]] on the [[market]]. | Main '''functions of portfolio''' analysis [[method]] involves [[identification]] and [[evaluation]] of all products or [[service]] groups offered by [[company]] on the [[market]]. | ||
Other basic functions of portfolio are: | Other basic functions of portfolio are: | ||
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* asses and reduce the [[risk]] of functioning in a dynamically changing [[environment]] | * asses and reduce the [[risk]] of functioning in a dynamically changing [[environment]] | ||
* provide feedback [[information]] about overall [[product]] performance | * provide feedback [[information]] about overall [[product]] performance | ||
* select optimal mix of investment possibilities | * select optimal mix of [[investment]] possibilities | ||
==Portfolio selection models== | ==Portfolio selection models== | ||
A good portfolio goes beyond than a wide and a long list of good shares and [[bonds]]. It should be a well balanced integrity which gives the particular investor protection and chances to achieve the goal, in economic reasoning, we talk about returns on investment. The investor ought to keen on building an portfolio which will suit all his [[needs]] and demands. | A good portfolio goes beyond than a wide and a long list of good shares and [[bonds]]. It should be a well balanced integrity which gives the particular investor protection and chances to achieve the goal, in economic reasoning, we talk about returns on investment. The investor ought to keen on building an portfolio which will suit all his [[needs]] and demands. | ||
Whenever we try to build a portfolio, we can not forget about uncertainty, very important or even the salient characteristic of security investment. Although, the economic factors were taken under consideration and were understood perfectly, non-economical influence might slip in and change the course of whole prosperity, market's level etc. Such examples as huge fire of acres of forest, devastating drought | Whenever we try to build a portfolio, we can not forget about uncertainty, very important or even the salient characteristic of security investment. Although, the [[economic factors]] were taken under consideration and were understood perfectly, non-economical influence might slip in and change the course of whole prosperity, market's level etc. Such examples as huge fire of acres of forest, devastating drought - all may struck gains of capital or dividends of one or greater amount of securities. | ||
===Analytical models=== | ===Analytical models=== | ||
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* ''' Strategic [[planning]]''': Companies use portfolio analysis to make decisions about which products and services to invest in and to develop strategies for growth. For example, a company may analyze its portfolio to determine which products are most profitable and which are not performing as well, then develop a [[plan]] to improve the performance of those products. | * ''' Strategic [[planning]]''': Companies use portfolio analysis to make decisions about which products and services to invest in and to develop strategies for growth. For example, a company may analyze its portfolio to determine which products are most profitable and which are not performing as well, then develop a [[plan]] to improve the performance of those products. | ||
* ''' Risk [[management]]''': Portfolio analysis can also be used to identify and manage risk. For example, a company may use portfolio analysis to identify areas of their business that are exposed to the highest risk and develop strategies to mitigate those risks. | * ''' Risk [[management]]''': Portfolio analysis can also be used to identify and manage risk. For example, a company may use portfolio analysis to identify areas of their business that are exposed to the highest risk and develop strategies to mitigate those risks. | ||
* ''' [[Resource]] allocation''': Portfolio analysis can be used to identify areas where resources should be allocated in order to maximize return on investment. For example, a company may use portfolio analysis to determine which products and services require additional resources in order to be successful. | * ''' [[Resource]] allocation''': Portfolio analysis can be used to identify areas where resources should be allocated in order to maximize [[return on investment]]. For example, a company may use portfolio analysis to determine which products and services require additional resources in order to be successful. | ||
==Advantages of Functions of portfolio== | ==Advantages of Functions of portfolio== | ||
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* It provides a comprehensive evaluation of the company’s [[competitive position]] in the market, which can be used to develop strategies for future growth. | * It provides a comprehensive evaluation of the company’s [[competitive position]] in the market, which can be used to develop strategies for future growth. | ||
* It helps identify areas of potential growth and opportunities for improvement. | * It helps identify areas of potential growth and opportunities for improvement. | ||
* It helps to optimize the portfolio of products or services to meet the needs of customers and the changing [[market environment]]. | * It helps to optimize the portfolio of products or services to meet the [[needs of customers]] and the changing [[market environment]]. | ||
* It enables companies to better assess the cost of [[production]], distribution and marketing of each product or service. | * It enables companies to better assess the cost of [[production]], distribution and marketing of each product or service. | ||
* It helps to identify areas of risk and provides insight into potential areas of concern. | * It helps to identify areas of risk and provides insight into potential areas of concern. | ||
| Line 55: | Line 40: | ||
==Limitations of Functions of portfolio== | ==Limitations of Functions of portfolio== | ||
The main limitations of portfolio analysis method include: | The main limitations of portfolio analysis method include: | ||
* Limited analytical [[capabilities]] | * Limited analytical [[capabilities]] - Portfolio analysis method is limited in its ability to identify and quantify the financial implications of a product or service portfolio. It does not provide detailed insights into the [[financial performance]] of each product or service group. | ||
* Difficulty in determining the optimal mix of products and services | * Difficulty in determining the optimal mix of products and services - Portfolio analysis method is not able to determine the optimal mix of products and services to maximize profitability. | ||
* Difficulty in evaluating non-financial factors | * Difficulty in evaluating non-financial factors - Portfolio analysis method does not take into account non-financial factors such as [[customer satisfaction]], reputation, [[brand]] recognition, and [[competitive positioning]]. | ||
* Insufficient data | * Insufficient data - Portfolio analysis method relies on reliable data, which may not be available in all cases. | ||
* Time-consuming [[process]] | * Time-consuming [[process]] - Portfolio analysis method is a complex and time-consuming process. It requires significant amounts of time and resources to complete. | ||
==Other approaches related to Functions of portfolio== | ==Other approaches related to Functions of portfolio== | ||
Portfolio analysis is a method used to identify and evaluate all products or services offered by a company on the market. It can be used to identify areas where the company can make changes and improve the overall performance. Here are some of the other approaches related to portfolio analysis: | Portfolio analysis is a method used to identify and evaluate all products or services offered by a company on the market. It can be used to identify areas where the company can make changes and improve the overall performance. Here are some of the other approaches related to portfolio analysis: | ||
* '''[[Competitor]] Analysis''': This approach involves a comparison of a company's products or services with those of its competitors. This helps to identify areas of strength and weakness in comparison to competitors. | * '''[[Competitor]] Analysis''': This approach involves a comparison of a company's products or services with those of its competitors. This helps to identify areas of strength and weakness in comparison to competitors. | ||
* '''Market Research''': This approach involves gathering information about customer preferences, [[industry]] trends, and other relevant data to help assess the market position of a product or service. | * '''Market Research''': This approach involves gathering information about customer preferences, [[industry]] trends, and other relevant data to help assess the [[market position]] of a product or service. | ||
* '''SWOT Analysis''': This approach involves identifying a company's Strengths, Weaknesses, Opportunities, and Threats in order to assess the competitive position of a product or service. | * '''SWOT Analysis''': This approach involves identifying a company's Strengths, Weaknesses, Opportunities, and Threats in order to assess the competitive position of a product or service. | ||
* '''Risk Analysis''': This approach involves assessing the potential risks associated with the development or launch of a product or service. | * '''Risk Analysis''': This approach involves assessing the potential risks associated with the development or launch of a product or service. | ||
* '''Financial Analysis''': This approach involves analyzing the financial performance of a product or service, such as profitability, return on investment, and cash flow. | * '''Financial Analysis''': This approach involves analyzing the financial performance of a product or service, such as profitability, return on investment, and cash flow. | ||
In summary, portfolio analysis is a method used to identify and evaluate all products or services offered by a company on the market. It can be used in conjunction with competitor analysis, market research, [[SWOT analysis]], risk analysis, and financial analysis to assess a company’s competitive positioning and potential risks associated with the development or launch of a product or service. | In summary, portfolio analysis is a method used to identify and evaluate all products or services offered by a company on the market. It can be used in conjunction with competitor analysis, [[market research]], [[SWOT analysis]], risk analysis, and financial analysis to assess a company’s competitive positioning and potential risks associated with the development or launch of a product or service. | ||
{{infobox5|list1={{i5link|a=[[SPACE method]]}} — {{i5link|a=[[Business portfolio analysis]]}} — {{i5link|a=[[Technological portfolio]]}} — {{i5link|a=[[Internal analysis]]}} — {{i5link|a=[[Business segment]]}} — {{i5link|a=[[ASTRA analysis]]}} — {{i5link|a=[[Market opportunity]]}} — {{i5link|a=[[Company situation analysis]]}} — {{i5link|a=[[Value of information]]}} }} | |||
==References== | ==References== | ||
* Chow, G. (1995). [https://www.jstor.org/stable/pdf/4479831.pdf?casa_token=nUTCaPyMeLYAAAAA:gx4BytJ7sRjr11II7HW0_5gHXBE1mWaWa-erAlneonl-qODIPKPb6ZenIY1B9OUOnUAKmgZuXFUC1q-qI-akEa0jV3vO7oZWGIhaTzGJQgF-0X9DBdya Portfolio selection based on return, risk, and relative performance]. Financial Analysts Journal, 51(2), 54-60. | * Chow, G. (1995). [https://www.jstor.org/stable/pdf/4479831.pdf?casa_token=nUTCaPyMeLYAAAAA:gx4BytJ7sRjr11II7HW0_5gHXBE1mWaWa-erAlneonl-qODIPKPb6ZenIY1B9OUOnUAKmgZuXFUC1q-qI-akEa0jV3vO7oZWGIhaTzGJQgF-0X9DBdya Portfolio selection based on return, risk, and relative performance]. Financial Analysts Journal, 51(2), 54-60. | ||
* Karpovich, A., Rymanov, A. (2018). [https://search-1ebscohost-1com-1kj5ddl2k01d6.han.uek.krakow.pl/login.aspx?direct=true&db=a9h&AN=131242676&lang=pl&site=ehost-live Portfolio mean-variance approach modifications: modulus function, principles of compromise, and | * Karpovich, A., Rymanov, A. (2018). [https://search-1ebscohost-1com-1kj5ddl2k01d6.han.uek.krakow.pl/login.aspx?direct=true&db=a9h&AN=131242676&lang=pl&site=ehost-live Portfolio mean-variance approach modifications: modulus function, principles of compromise, and ‘min-max’ approach]. Current Science (00113891). 8/10/2018, Vol. 115 Issue 3, p493-498. | ||
* Liesiö, J. (2014). [http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.304.231&rep=rep1&type=pdf Measurable multiattribute value functions for portfolio decision analysis]. Decision Analysis, 11(1), 1-20. | * Liesiö, J. (2014). [http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.304.231&rep=rep1&type=pdf Measurable multiattribute value functions for portfolio decision analysis]. Decision Analysis, 11(1), 1-20. | ||
* Markowitz M. Harry (1959). ''Portfolio Selection'' | * Markowitz M. Harry (1959). ''Portfolio Selection'' | ||
Latest revision as of 21:51, 17 November 2023
Main functions of portfolio analysis method involves identification and evaluation of all products or service groups offered by company on the market. Other basic functions of portfolio are:
- prepare efficient product/service mix to meet customer demand
- choose proper marketing strategy for each group
- project sales revenue and cost for each group independently
- distribute resources to groups with the highest potential
- provide information for strategic decision making
- asses and reduce the risk of functioning in a dynamically changing environment
- provide feedback information about overall product performance
- select optimal mix of investment possibilities
Portfolio selection models
A good portfolio goes beyond than a wide and a long list of good shares and bonds. It should be a well balanced integrity which gives the particular investor protection and chances to achieve the goal, in economic reasoning, we talk about returns on investment. The investor ought to keen on building an portfolio which will suit all his needs and demands.
Whenever we try to build a portfolio, we can not forget about uncertainty, very important or even the salient characteristic of security investment. Although, the economic factors were taken under consideration and were understood perfectly, non-economical influence might slip in and change the course of whole prosperity, market's level etc. Such examples as huge fire of acres of forest, devastating drought - all may struck gains of capital or dividends of one or greater amount of securities.
Analytical models
Analysis of a portfolio starts with detailed informations regarding to personal securities. Going forward into analysis it should end with a summary taking into consideration portfolio as a whole. One of the main sources of information is the previous performance of each securities. Secondly, informations should be sourced out of the predictions about the future performance. When we consider past performance of securities as the inputs within our analysis model the outcome of that analysis will be portfolios which where efficient, especially, in the past. When we take beliefs, predictions of security analysis as the inputs, outcome will be simple, implications of these predictions for better and feeble portfolios. Portfolio theory is being related to various methods of portfolios selection under relevantly risky conditions. Moving forward into this theory, the future return on chosen portfolio is estimated on a probability diversification that includes within account the investor's utility function.
- The Mean-Variance (MV) model describes the optimum portfolio as the portfolio that reduces to minimum subject's variety to the restriction of a given significant return.
Examples of Functions of portfolio
- Market segmentation: Portfolio analysis can help identify distinct customer segments, allowing companies to tailor their product offerings and target marketing accordingly. For example, a company may use portfolio analysis to determine which product categories are most attractive to different customer segments, then develop targeted marketing campaigns for each segment.
- Strategic planning: Companies use portfolio analysis to make decisions about which products and services to invest in and to develop strategies for growth. For example, a company may analyze its portfolio to determine which products are most profitable and which are not performing as well, then develop a plan to improve the performance of those products.
- Risk management: Portfolio analysis can also be used to identify and manage risk. For example, a company may use portfolio analysis to identify areas of their business that are exposed to the highest risk and develop strategies to mitigate those risks.
- Resource allocation: Portfolio analysis can be used to identify areas where resources should be allocated in order to maximize return on investment. For example, a company may use portfolio analysis to determine which products and services require additional resources in order to be successful.
Advantages of Functions of portfolio
Portfolio analysis method can be extremely beneficial to businesses, offering a comprehensive view of what products or services are offered by the company. The following are some of the advantages of portfolio analysis methods:
- Allows companies to identify and evaluate all of their products or services offered on the market. This allows them to assess the relative strengths and weaknesses of each product or service and make informed decisions on how to best allocate resources.
- It provides a comprehensive evaluation of the company’s competitive position in the market, which can be used to develop strategies for future growth.
- It helps identify areas of potential growth and opportunities for improvement.
- It helps to optimize the portfolio of products or services to meet the needs of customers and the changing market environment.
- It enables companies to better assess the cost of production, distribution and marketing of each product or service.
- It helps to identify areas of risk and provides insight into potential areas of concern.
Limitations of Functions of portfolio
The main limitations of portfolio analysis method include:
- Limited analytical capabilities - Portfolio analysis method is limited in its ability to identify and quantify the financial implications of a product or service portfolio. It does not provide detailed insights into the financial performance of each product or service group.
- Difficulty in determining the optimal mix of products and services - Portfolio analysis method is not able to determine the optimal mix of products and services to maximize profitability.
- Difficulty in evaluating non-financial factors - Portfolio analysis method does not take into account non-financial factors such as customer satisfaction, reputation, brand recognition, and competitive positioning.
- Insufficient data - Portfolio analysis method relies on reliable data, which may not be available in all cases.
- Time-consuming process - Portfolio analysis method is a complex and time-consuming process. It requires significant amounts of time and resources to complete.
Portfolio analysis is a method used to identify and evaluate all products or services offered by a company on the market. It can be used to identify areas where the company can make changes and improve the overall performance. Here are some of the other approaches related to portfolio analysis:
- Competitor Analysis: This approach involves a comparison of a company's products or services with those of its competitors. This helps to identify areas of strength and weakness in comparison to competitors.
- Market Research: This approach involves gathering information about customer preferences, industry trends, and other relevant data to help assess the market position of a product or service.
- SWOT Analysis: This approach involves identifying a company's Strengths, Weaknesses, Opportunities, and Threats in order to assess the competitive position of a product or service.
- Risk Analysis: This approach involves assessing the potential risks associated with the development or launch of a product or service.
- Financial Analysis: This approach involves analyzing the financial performance of a product or service, such as profitability, return on investment, and cash flow.
In summary, portfolio analysis is a method used to identify and evaluate all products or services offered by a company on the market. It can be used in conjunction with competitor analysis, market research, SWOT analysis, risk analysis, and financial analysis to assess a company’s competitive positioning and potential risks associated with the development or launch of a product or service.
| Functions of portfolio — recommended articles |
| SPACE method — Business portfolio analysis — Technological portfolio — Internal analysis — Business segment — ASTRA analysis — Market opportunity — Company situation analysis — Value of information |
References
- Chow, G. (1995). Portfolio selection based on return, risk, and relative performance. Financial Analysts Journal, 51(2), 54-60.
- Karpovich, A., Rymanov, A. (2018). Portfolio mean-variance approach modifications: modulus function, principles of compromise, and ‘min-max’ approach. Current Science (00113891). 8/10/2018, Vol. 115 Issue 3, p493-498.
- Liesiö, J. (2014). Measurable multiattribute value functions for portfolio decision analysis. Decision Analysis, 11(1), 1-20.
- Markowitz M. Harry (1959). Portfolio Selection
Author: Grzegorz Szewczyk
