Portfolio planning is a very useful tool. It is the method that helps the company executives to assess their firms’ prospects for a winning share within each of its industries. It also offers suggestions about what to do within each industry, and lets the managers have ideas on how to allocate resources across industries. Portfolio planning determines the company’s position within the industry.
The management in charge of large firms that are involved in many different businesses must find out how to manage such portfolios. For example, General Electric (GE) has a very wide variety portfolio of industries, including financial services, insurance, electricity generation, light bulbs, television, theme parks, robotics, medical equipment, railroad locomotives, and aircraft jet engines. GE executives, therefore, must make a decision about which units to grow, the ones to shrink, and the ones that needs to be abandoned.