Factors Affecting Portfolio Strategy

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These factors are categorised into three sections:

External Environmental factors, Internal Factors and the Common Factors as given below:

 1.      External Environmental Constraints

a.       Competition from Other Businesses.

b.      Social and Cultural Factors.

                                                              i.      Industry and Cultural Backgrounds.

c.       Intra-Organisational Factors

d.      Laws , Regulations and Govt Policies.

e.       Technological factors

f.       Environmental factors

 

2.      Internal Environment

a.       Changes in Executive Management.

                                                              i.      Managerial Attitude towards Risk

                                                            ii.      Managerial Power Relations

                                                          iii.      Styles of Decision Making

b.      Transformations in Organizational Structure.

c.       Corporate Culture

d.      Personal Characteristics

e.       Execution Capacity and a Few Others.

 

3.      Common Factors

a.      Value System in Decision making

b.      Influence of Past Strategy

c.       Coalition Phenomenon.

d.      Pressures from Stakeholders

e.       Time Dimension

f.       Reaction of Competitors

g.      Availability of Information

h.      Critical Success Factors and Distinctive Competencies

 

Alternatively it can be grouped into quantitative and qualitative factors.

Quantitative factors include the business unit's market share, growth rate, profitability and debt/equity ratio. Qualitative factors include its brand name, values, core strengths and management. These factors, where unique and valuable, contribute to the business unit's strategic advantage amongst its competitors. The strategist’s challenge is to simultaneously manage three critical factors: values, opportunities and capabilities.

 

There is still another form of classification based on the variables from theoretical frameworks to study external and internal business environment of the firm 

This analysis is adaptable to multi product market firms in which each product/market is managed as a separate business or profit centre and the firm is not dominated by single product/market. Portfolio Techniques with display matrix are as follows-:

• BCG Growth-Share Matrix

• GE Nine-Cell Planning Grid

• Profit Impact Market Strategy Model

• Product/Market Evolution Matrix

 • Directional Policy Matrix

 • Strategic Position and action evaluation.

These display matrices that hold key variables in different proportions of influence on portfolio strategy were specifically covered in earlier posts.

Those who read this, also read:

1. Factors affecting Portfolio Strategy- Internal Factors

2. Factors affecting Portfolio strategy - External Factors

3. Factors Affecting Portfolio Strategy- Common Factors

4. BCG Matrix

5. G E Matrix

6. Organizational Capability Profile