The Mission Statement and Portfolio

Every company and organization should have a goal of what it wants to be, and a plan or strategy as to how to reach that goal: a mission statement. The way a company defines its mission, can make a difference as to how they are perceived by the public. A company's mission statement should not merely define what it does, but rather tell its customers what it does for them. The mission statement should be market-oriented. For example, Microsoft's goal is what the company tells its customers: "Your potential, our passion." Target's statement is "Expect more. Pay less." Mission statements can't be vague.
     Once the company has its mission statement, it has to then plan its business portfolio, which is the collection of businesses that make up the company. There are two steps in making this portfolio: 1) Analyzing the company's current portfolio and decide which businesses to invest in. 2) Shaping the future portfolio by making strategies for improving and resizing the company.

In analyzing the current business portfolio, the Boston Consulting Group (BCG) approach is pretty well-known in the business world. This approach uses the growth-share matrix, which evaluates a company based on its market growth rate and relative market share, (its piece of the pie). This matrix shows four types of SBU's (strategic business units) which can refer to either a whole division within the company or even just to a specific product. These categories are:

1) Stars, which are products that are high-growth and high-share, or products which are currently hard to maintain but ultimately become cash cows (the next category).
2) Cash cows, which are low-growth and high-share products. In other words, the market isn't that large, and the company has the largest piece of the pie within that market. These are the company's most profitable products and many times are used to support other SBU's that need investments.
3) Question marks, which are low-share and high-growth products. These require a lot of cash to maintain, some end up as stars while others are just not worth it for the company to keep and are therefore discontinued.
4) Dogs, which are low-growth and low-share products. These many times result when the company doesn't do sufficient research beforehand, They sometimes generate enough cash to survive, but obviously not as much as cash cows.
However, this approach doesn't always make sense for a company to take, as it is many times difficult to categorize every product or SBU into one of these four categories. Furthermore, these categories all define where the product is now, but says nothing about the future. Therefore, many companies instead customize their own approaches to evaluating their SBU's, and decentralize the strategic planning to division managers.

Growth and Downsizing


There are four main ways for a company to grow. Although they may sound complicated, they are really very simple to understand:

1) Market penetration- increasing the sales of an existing product without changing the product at all. This is usually done when the market is not yet saturated.
Example: Starbucks building stores on every corner.             
2) Market development- finding new markets for the company's current products.
Example: Starbucks opening stores in cities without them.
3) Product development- creating new products.
Example: Starbucks selling other products such as CD's in their stores.
4) Diversification- starting completely new businesses that have nothing to do with the existing ones.
Example: Starbucks opening up a car wash.


Many times companies find that they have too many products which are unprofitable, and therefore want to downsize. Downsizing is not necessarily a bad thing. It just means that the company is reducing its portfolio by getting rid of products that are not adding to the company's value. It's all part of strategy. Having more players on your basketball team doesn't do you any good if those players are bad at basketball. It's the same idea here: If a grocery store makes a product that doesn't drive in any profit, and even causes the store to lose money making it, it's not a bad thing for the company to discontinue making it.