Both the BCG and GE portfolio models have a number of benefits. They can help managers think more strategically, better understand the economics of their SBUs, improve the quality of their plans, improve communication between SBU and corporate management, identify important issues, eliminate weaker SBUs, and strengthen their investment in more promising SBUs.
However, portfolio models must be used cautiously. They may lead a firm to overemphasize market-share growth and entry into high-growth businesses or to neglect its current businesses. Also, the models' results are sensitive to ratings and weights and can be manipulated to produce a desired location in the matrix. Finally, the models fail to delineate the synergies between two or more businesses, which means that making decisions for one business at a time might be risky. There is a danger of terminating a losing SBU that actually provides an essential core competence needed by several other business units. Overall, though, portfolio models have improved managers' analytical and strategic capabilities and allowed them to make better decisions than they could with mere impressions.10
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