Limitations of Portfolio Planning

Portfolio planning is a useful tool, but has important limitations.

●      Portfolio planning usually oversimplifies the practical reality of competition by focusing only on a pair of dimensions while analyzing the company’s operations within an industry. There are importance of many dimensions to consider while making strategic decisions, hence two are not enough.

●      Portfolio planning is a useful tool but it can lead to motivational problems among employees. For example, if workers readily know that their firm is classified as a dog, then they may give up pushing ahead and lose all hope for the future.

●      Portfolio planning does not identify any new scope. This tool only deals with existing businesses.

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