Portfolio Planning is economics put into action, an attempt to “use limited resources to fulfill unlimited demands” and although tools such as BCG and GE Matrices are designed for large organisations with extended product lines, I also feel they are useful for smaller companies, who also have unlimited demands but much more limited resources.
Portfolio planning has three real functions; balance future & present earnings, quantify existing cash flow and to analysise the company’s Strategic Gap (their expected performance – desired performance). The real use to small companies (whose cash flows and strategic gaps will be more obvious) is in the balancing function. Have these companies assured they aren’t relying on past innovations to maintain current market share? Or is there to much of a gap between certain product releases?
But a smaller scale application of the BCG matrix would highlight some of this models problems;
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market share and growth rate would be harder to obtain for these smaller companies,
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market growth, cash use and cash generation may be less (or even not) linked in smaller organisations/markets
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blindly applying the matrix would put blinkers to innovation on managers eyes, and as such they could be caught out by not paying attention to new market developments
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attempting to ‘balance’ a small companies by cutting out certain project could lead to a much higher loss of ’synergies’ than in large companies
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