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Portfolio Analysis: Igniting a long-term spirit in a short-term world (II). Rationale, Philosophy, and Objectives.

Have a beautiful day. It is Friday, and I am sure that we are looking forward to relaxing during the weekend, or at least trying to relax or procure ourselves a “time out”. This is an important publication. As you already distinguish, we always start our sagas by defining their own rationale, philosophy, and objectives.

“La Pureté Virginale”. An aquarelle painted by Eleonora Escalante. Paper: Fabriano Traditional White 300 GSM Grana Fina. Size: 15 inches x 22 inches.

Alors, let´s begin:

This saga rationale. “Portfolio analysis: igniting a long-term spirit in a short-term world” principles or fundamental reasons are grounded on the importance of visualizing with a long-term scale concerning varied growth potentials that occur when our endeavors or companies expand through multiple SBUs. As we mentioned in our last post, each of our activities initiates with a uni-product, which later on are diversified, along the way in response to fulfill a demand from our clients or to provide alternative increase opportunities to help our employees and our society. When we evolve from a one single line business to a multi strategic business unit or a multiple SBUs entity, we do it because we wish to help others to be better off. 

Diversification is the basis for any portfolio analysis.  Each SBU from our organization has different growth potentials, and these are reached over time. Some SBUs are extremely successful from the start. Meanwhile, other SBUs take a lot of time to profit but are beneficial to keep, particularly for the people who have been directly involved with them. Each SBU has a team that serves different clients and points of sales, operates in diverse business environments, distinct competitive landscapes, multi-markets, and multi-national locations. Each SBU requires different strategic decisions to ensure the achievement of the total organization´s overall goals and objectives but more relevant is to achieve the integral well-being of everyone around the SBUs (stakeholders defined as employees, clients, community, regulators, and the society).

In the context of a multi SBUs corporation, each of the SBU managers is on duty to design their action plan to make it prosperous and triumphant for the people. So, the Board of Directors, or the owner, ends up dealing with different businesses SBUs competing in numerous industrial settings. Even if the diversification is concentric, or related in between; when we have several products that compete in different economic sectors or industries, that is where we end up managing a multi-SBU corporation (diversified). In consequence, there is a need for management and the decision-makers of that multi-SBU entity to understand and shape how, when, and where to add new what (products and services); and remove or spin-off any of the existing SBUS or modify them.

Our rationale is always to respond to the question: What businesses should we be in? Should we wait to profit? How to win and hold a position of leadership in the marketplace with our portfolio of SBUs? What new SBUs should we be entering? Which SBUs to dismiss? Which to keep strategically? The answer to these questions is seen as portfolio analysis decision making.

The rationale of this saga is to learn how to decide when it comes to a portfolio analysis with an emphasis on a product-based qualification study of the most relevant frameworks intended for it. And we will try to ignite patience and endurance for expected growth. We will try to apply the Samaritan instruction in the middle of our era that is indifferent to the pain of our fellows and it is looking to cash out profits immediately, and it is waking up to open the conscience that has focused only on shareholder value with a short-term span.

Philosophy of “Portfolio Analysis: Igniting a long-term spirit in a short-term world”. Our integral philosophy of business and corporate strategy will accompany us during the next 26 episodes. And we will swivel around the idea of standing by living our present without losing the future. The nature of our philosophy asserts the integral long-standing wellbeing of equal human beings in our local communities with balanced global commerce, all under the umbrella of caring for our environment.

Environmental Repair model at our portfolio analysis philosophy.

We also are built on the philosophy that human beings hold at least 80 years of good quality of life, and the baton from one generation to the next one happens once the subsequent cohort grasps the integral maturity. Integral maturity is defined not in a number of years, but in the mental capacity to be bold enough with a cautious ruling. We do not support the variable age per se (number of years) but brain integral development (360 degrees).

Our core philosophy is considering a minimum of 80 years life span for human development.

In addition, our theoretical (and full of examples) saga is substantiated under the paradigm that we belong to a balanced society; in which the cream of the crop and the base of the population are clear that democracy is the only truly significant political-economic system. A balanced society lives the ethical ecological capitalism which has permeated all the social classes within it.

Our philosophy is pro a balanced center eco-friendly economies. We strive for ethical ecological capitalism.

Far from justifying our saga for these center economic systems, we are convinced that prosperity arrives at societies that dignify and procure a Middle-Class for a majority of their populations; societies that have left behind poverty (or at least poverty is almost eradicated). The global middle class is defined as families living with an annual income between US$28,800 to US$175,200.

Our philosophy is aligned to convert the Middle-Class as the main key success factor of balanced societies.

Our philosophy also kindles support for the arts and education. Expect a rich portfolio of examples in relation to these two economic sectors or industries. We believe in the Samaritan Wisdom of the Bible, which helps those who have been brutally hurt and are in crucial need to overcome their difficulties, even more to those who can´t repay us or seem to be our competitors.  The parable of the Good Samaritan (Luke 10:30-37) is a story used by Jesus-Christ to illustrate how to “love our neighbors as ourselves.” When other people need our help the most, like the wounded man on the road to Jericho, is when our love for our fellows is truly tested. Jesus tells us to be like the Good Samaritan, helping others in times of need, and not be like the Priest or the Levite who ignoring the misfortune of those who belonged to their own. “There is kindness and humanity still on this planet”.

Good Samaritan by Olga Bakhtina. Painted in 2016, oil on canvas, 100x100cm.

Objectives of the saga:

  • Understand the portfolio analysis at the conceptual and methodological levels in corporate strategy.
  • Offer a theoretical step-by-step explanation to construct portfolio analysis matrices corresponding to the main frameworks utilized.
  • Provide unpretentious but realistic examples to illustrate each of the portfolio analysis frameworks.
  • Know that the selection of a portfolio analysis model goes beyond the financial returns. Each model that we will explore has its criteria, guidelines, pros, and cons. Not all the models are interchangeable because specific measures are required for each of them.
  • Comprehend that the phrase “Don´t put all your eggs in one basket” is a lesson for our businesses living, particularly after the COVID19 pandemic.
  • Figure out that our short-sightedness when it comes to disruptive technologies has paved our current problems, and long-term planning must come out of this.
  • Validate that ethical ecologic capitalism is the next evolution and renewal for capitalism at the corporate strategy level. When it comes to diversified corporations, with a renewed philosophy, a new integral portfolio analysis method for the next generations is a necessity to design, test, approve, teach, apply and enhance.
  • Explore the simplicity of portfolio analysis with a straightforward language, that can be trouble-free for the diverse audience that reads us. After the end of this saga, any multi SBU company will be able to apply it in their long-run analysis.
  • The Good Samaritan Wisdom is our guideline for this saga. A long-term spirit in a short-term world.

We will continue our journey with a song that lights the melody for our reading episode today. Please be aware that we select the songs randomly, we try to find those themes that can help us to enjoy our study, and remember them later.

Thank you for reading to me. All the best, and see you next week.

Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated.

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