Questions on Mutiple Topics - Essay Example

Portfolio matrices have become popular tools due to the various advantages that companies derive from them. First, portfolio matrices are very flexible as they can be applied to products, brands, and strategic business units. It should be noted that the use of portfolio analysis is not limited to products or brands only. Portfolio matrices can be used to ascertain the competitiveness and strengths of brands, product lines, and profit centers. Portfolio matrices are often used as cash management tools as they provide managers an easy and graphical way to assess how much cash the business will be using or generating in putting its products or services in the market.

It also tells managers which products or units to invest in according to their attractiveness and competitiveness. The use of portfolio analysis is essentially to help managers focus on their core and profitable businesses. Portfolio matrices are also commonly used among business organizations because of their relative simplicity. The core ideas behind each portfolio matrix can be easily grasped and understood by any manager. Therefore, portfolio matrices are often easier to understand than other business tools.

However, the use of portfolio matrices in crafting business strategies also presents some drawbacks. For one, portfolio matrices are often seen as having a “too simplistic” view of the world that it overlooked other important qualitative factors. For example, the Boston Consulting Group (BCG) matrix considers the relationship between market attractiveness and market growth. It should be noted however, that high growth markets are not necessarily attractive and low growth markets are not necessarily unattractive (Growth-Share Matrix, 2006).

Another pitfall of portfolio matrices is that it does not consider the interaction of business units or the entities being considered. It should be noted that in portfolio matrix analyses, products are considered in isolation