Green portfolio analysis - Marketing Management

Despite criticisms of portfolio analysis, the techniques and applications of these of analyses have continued to develop. One recent development which illustrates how these tools are continuously evolving to meet the needs of the contemporary marketer is the combination of portfolio analysis and the issue of ‘green’ marketing. Developed by Ilinitch and Schaltegger,14 this notion of a ‘green’ business portfolio. The basic notion in this three-dimensional matrix is suggested as involving quantifying the environment impacts of business activities and comparing them with economic aspects of examined business.

The horizontal plane of the matrix consists of the traditional BCG matrix of growth against profitability with the quadrants retaining their respective metaphors. The size of the circle represents the size of the product or firm, in economic or environmental terms. The third, vertical dimension measures environmental impact. Recent developments in accounting mean this can be quantified at plant, SBU, or firm level. The pollution units are calculated by multiplying toxic discharges by regulation standards weighting coefficients. Products deemed to be ecologically sound are called ‘green’ and their counterparts are called ‘dirty’. Thus we see the quaint notion of ‘green cash cows’ and ‘dirty dogs’.

The ‘green’ business portfolio

green’ business portfolio

The authors suggest that ‘dirty cash cows’ are usually old, declining industries that are in the short term very profitable to firms and communities. However, in the long term, the negative publicity and financial penalties ultimately make such industries risky. Alternatively, although the ‘green dog’ is financially unprofitable, the authors argue that the strategic challenge is to make it viable. This, they suggest, can be done by creating a market for the product and/or capturing market share. Creating a market may in turn involve changing customer values and behaviour, whereas capturing market share may involve lowering production costs.

Battery powered vehicles probably represent an example of ‘green dogs’. Many of these vehicles are at the stage where technologically they represent a substitute for conventional petrol and diesel engine alternatives. Technically proficient as such vehicles may be, the strategic challenge facing their marketers is, as the green business portfolio suggests, that of creating a market. Quite simply, still not enough customers value the undoubtedly green benefits which electric vehicles offer. The marketers of such vehicles face the task of changing customer values and behaviour, although recent initiatives by Government should boost their popularity.

We have included this ‘green’ portfolio technique not because there is any evidence of it being potentially more valuable to the development of strategic marketing than some of the other recent ideas on portfolio analysis, but rather it illustrates that portfolio techniques are being constantly improved and have changed substantially since the early days of the original BCG portfolio. Indeed the ‘green’ portfolio notion reflects current concerns in relation to global warming. Portfolio analysis provides a limited solution to the issue of the allocation of resources and the creation of more appropriate strategies as a result of the analysis required when applying such procedures to businesses. After all, it is more ‘scientific’ than simply guesswork and intuition in making decision. Such techniques should be regarded as supporting decision-making processes and not as a substitute for them.

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