This focuses on effectiveness or performance of the organization as a whole. Effectiveness or performance of an organization as a whole may depend on various factors e.g. role in social responsibility, corporate image, and business portfolio.
Business portfolio i.e. the combination of businesses owned by an organization, most determines the organization‘s performance. The performance most depends on whether the businesses are good and whether the organization is strong in them. How good a business is and how strong an organization is in the business determines the attractiveness of the business. An organization should allocate resources to businesses according to attractiveness i.e. the more the attractiveness the more the resources allocated. The amount of resources allocated to a business determines the size of the business.
Business portfolio reflects how an organization has allocated its resources among various businesses. How well such resources have been allocated or utilized determines the organization‘s performance. Performance is seriously compromised if resource allocation or utilization violates the criterion of attractiveness e.g. allocating large resources to unattractive businesses at the expense of attractive ones. Portfolio analysis, therefore, plays a very important role in corporate strategic analysis and choice.
