Previous approaches to portfolio analysis in international markets focused on the country as the basic portfolio unit and relied on an assessment of market attractiveness and competitive strength to determine how to allocate resources. This article proposes an approach to international portfolio analysis based on an examination of the interconnectedness of geographic markets and product businesses. This enables management to identify strategic portfolio units (SPUs) based on market interconnectedness, as well as competitive strength, and market attractiveness. SPUs incorporating market interconnectedness enable management to establish directions for future growth and determine how expansion or retraction of the portfolio in a given direction impacts other portfolio units. Opportunities to leverage core competencies across portfolio units in international markets and to reconfigure portfolio units and operations so as to achieve greater synergies can also be identified.
