What is a Product Portfolio?
A product portfolio is a group of two or more products that represent a family of items produced by a company. Each family group uses a basic platform for multiple products; in some cases, multiple parts may comprise a few different types of products within the same portfolio. An example of basic platforms in use by a product portfolio is auto manufacturing. A manufacturer may use the same chassis for several different types of cars, resulting in a product family. Computer manufacturing often requires the same materials to produce products that have specific variations, creating a family group.
When creating a product portfolio, companies often use multiple business segments to get the products from the production facility to the end user. These segments can include distribution channels, promotional strategies, pricing methods and other elements common to all stages of business production. Using the same elements in a repeated manner can save the company money. Instead of reinventing the wheel for every new product, companies will divide the segment among each item in the product portfolio to use the same core competencies to make the product a success.
Companies may also create an entire product line for an individual item in their product portfolio. Product lines often represent the strongest items in the portfolio. These can become the backbone of the company and may lead to a competitive advantage in the economic marketplace. For example, a cell phone manufacturer may create a smart phone that uses leading technology to create an advanced personal digital product. While the smart phone is part of the company’s cell phone product portfolio, the popularity of the phone may result in the creation of an entire product line of smart phones. The phone will essentially be its own product line, including phones with different colors, memory capacities, functions or other features.
Companies may also create what is known as a product pipeline. This represents new products that the company hopes to introduce into its current portfolio. Technology and pharmaceutical companies typically have these pipelines because their products take longer to develop and bring to the marketplace. Investors often review the product pipeline of companies to determine how well the company is measuring the current market demand for goods. New products that do not seem to have the desired product features requested by consumers can result in a company losing market share. This ultimately weakens the company's product portfolio and can lead to a disadvantage in the competitive market in terms of product offerings.
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