HOFER’S PRODUCT MARKET EVOLUTION Done by: Athira SomanBUSINESS PORTFOLIO ANALYSIS The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. . Just as sound financial investments should be supported and unsound ones discarded.Business portfolio analysis as an organizational strategy formulation technique is based on the philosophy that organizations should develop strategy much as they handle investment portfolios. sound organizational activities should be emphasized and unsound ones deemphasized. . Hofer’s Product Market Matrix . .Product Market Evolution Matrix displays the matrix where strategic business units are graphically represented according to two basic indicators: Competitive position on the market stage corresponding to the product/market evolution. each with certain characteristics by which the position of the market can be identified. DEVELOPMENT GROWTH SHAKE-OUT MATURITY DECLINE PETRIFICATION .Charles W. Hofer described seven stages of the life cycle. . Its relatively large share of the market combined with its being at the development stage of product. A strategy would have to be developed to overcome this low market share in order to justify more investments. Business unit B It is somewhat similar to A. However. .Business unit A It would to be a developing winner.market evolution and its potential for being in a strong competitive position make it a good candidate for receiving more corporate resources. it has a relatively small share of the market given its strong competitive position. A strategy must be developed to overcome the low market share and weak competitive position in order to justify future investments. and is in a relatively strong position. Business unit D It is in a shakeout period. has a relatively large share of the market. . Investment should be made to maintain that position.Business unit C It might be classified as a potential loser. Business units E and F They have relatively large market share and has strong competitive position. It should be used for cash generation. if possible. . the long-run strategy will more the likely be divestment or liquidation. It should be managed to generate cash in the short run. Business unit G It has low market share and weak competitive position. however. . increases concentration and involvement in competitive world.STRENGHTS o Set objective and allocate resources o Use of externally oriented data o Cash flow availability o Graphical communication of business mix o Identify developing winners o Illustrates distribution of business in an industry o Encourages promotion of competitive analysis o Selective earmarking of financial resources o Reduce risks. Provides an illusion of scientific rigor. Naively following portfolio prescriptions may reduce profit. .WEAKNESS o Difficulty in defining product/market o o o o segment. No clear idea what makes an industry attractive . Suggests impractical standard strategies. the present matrix offers the company the possibility to make a diagnosis regarding the portfolio. . Similar to the McKinsey matrix.The power of the Hofer matrix resides in the fact that it may outline the distribution of strategic business units during stages specific to life cycle of the market. which have recently penetrated the market or which are about to become ”Stars”. in order to establish if it exhibits a balanced or unbalanced structure. A balanced portfolio should be composed of strategic business units of the type corresponding to ”Stars” and to ”Cash Cows” and to a few ”Question Marks”.