Product Portfolio

AAA

DEFINITION of 'Product Portfolio'

The collection of different items a company sells. Within the product portfolio, each item typically makes different contributions to the company’s bottom line. Some products cost more to produce, some are increasing their market share (or losing market share) at a faster rate, some bring in more revenue and some have greater marketing expenses. 

INVESTOPEDIA EXPLAINS 'Product Portfolio'

Managing a product portfolio entails analyzing consumer behavior to determine how to expand with new products and how to improve profitability by removing underperforming or money-losing products. A broader product portfolio offers consumers more choices and gives a company more opportunities to capture consumers with different needs and tastes.

For example, Coca-Cola’s product portfolio consists of regular, low- and no-calorie beverages including sodas (e.g., Coca-Cola and Coke Zero), energy drinks, still and sparkling waters (e.g., Dasani), juices and juice drinks, sports drinks (e.g., vitaminwater) and bottled teas.

A key decision for any company with a product portfolio, as opposed to a single product, is how to allocate investment to each product based on its market share and its market growth rate. Based on their performance in these two areas, the items in a product portfolio can be divided into four categories:

  • High-growth, high market-share products (“stars”) 
  • Low-growth, high market-share products (“cash cows”)
  • Low-growth, low market-share products (“pets” or “dogs”) 
  • High-growth, low market-share products (“question marks”) 

Each requires a different strategy and level of investment. For example, companies will invest more in high-growth products, even though this might mean minimizing profits in the short term, in the hopes that these products will become cash cows, which generate more cash for a lower level of investment compared to other products in the portfolio. Companies might also decide to sell their dogs/pets, which don’t generate a profit beyond the investment required to maintain them.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  3. Historic Pricing

    A method for calculating the value of an asset using the last ...
  4. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
  5. Ulcer Index - UI

    An indicator developed by Peter G. Martin and Byron B. McCann ...
  6. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...
Related Articles
  1. Mutual Funds & ETFs

    How To Apply Technical Indicators To Mutual Funds

    Mutual funds do not readily lend themselves to technical analysis, but investors can use common indicators to evaluate mutual funds as easily as stocks.
  2. Professionals

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
  3. Mutual Funds & ETFs

    Are These 2015's Most Promising Mutual Funds?

    For 2015, the mutual funds covered below are likely to offer more upside potential than the vast majority of mutual funds in existence.
  4. Mutual Funds & ETFs

    Why These Could Be 2015's 10 Best Mutual Funds

    These 10 mutual funds offer strong potential for 2015. Here's why.
  5. Professionals

    State Street Slashes ETF Fees

    State Street has slashed fees on 41 of its ETFs in the wake of historic redemptions.
  6. Stock Analysis

    Will Spinoffs Give American Capital A Pop?

    American Capital shareholders have long awaited a plan to spin off the company's investments from its prized asset-management business.
  7. Mutual Funds & ETFs

    Pimco and Vanguard: A Tale of Two Fund Managers

    A look at the similarities and differences of asset management giants Pimco and Vanguard.
  8. Fundamental Analysis

    An Overview of Janus Capital Management

    A look at Janus Capital and the funds it manages.
  9. Mutual Funds & ETFs

    Five Janus Mutual Funds With High Alpha

    A look at some of the alpha-generating equity funds from Janus.
  10. Mutual Funds & ETFs

    The Impact of the Janus Market Timing Ruling

    A look at the impact of the Janus Supreme Court ruling on market timing.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center