Shabalala, S.
A icle
P oduc /Business Po olio managemen : Logic, s uc u al,
and manage ial implica ions
Sou h A ican Jou nal o Business Managemen
P o ided in Coope a ion wi h:
Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica
Sugges ed Ci a ion: Shabalala, S. (1985) : P oduc /Business Po olio managemen : Logic, s uc u al,
and manage ial implica ions, Sou h A ican Jou nal o Business Managemen , ISSN 2078-5976,
A ican Online Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 16, Iss. 1, pp. 18-26,
h ps://doi.o g/10.4102/sajbm. 16i1.1066
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/217883
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P oduc /Business
Po olio
managemen :
Logic,
s uc u al,
and
manage ial
implica ions
S.
Shabalala
Depa men o Business S udies, Uni e si y o Zimbabwe, Ha a e, Zimbabwe
The
objec i e
and
scope o his a icle
a e
o discuss he
logic o P oducUBusiness Po olio managemen
and
o
demons a e how he expec ed op imal esul s
o
such
managemen
a e
unde mined, i no comple ely unde mined
by
ac o s which
a e
quin essen ial o o ganiza ion ci cum-
s ances. These ac o s include, among o he hings,
o ganiza ional s uc u al a ibu es (di e en ia ion,
in eg a ion sys ems, powe dis ibu ion, uni s in e -
dependences e c.), in o ma ion a ailabili y, pe sonal alues
o manage s, ewa d sys ems, e c.
In
discussing he issues
men ioned
abo e
he sequence will
be
as
ollows: The
o e all look
a
he basic concep o P oduc /Business
Po olio s a egic managemen ; he gene al limi a ions
o
he no ma i e- a ional assump ions o S a egic Business
Uni s
(SBUs)
Po olio managemen ; he speci ic a en ion
o
be
paid
o indi idual o ganiza ional
and
manage ial
ac o s
as
hey a ec s a egic managemen
in
di e si ied
companies;
and
he implica ions
o
he abo e issues o op
managemen o business ins i u ions.
S.
A .
J.
Bus. Mgm .
1985,
16:
18-
26
Die
doel
en
om ang
an
hie die a ikel is
'n
besp eking
an
P oduk-/Besigheidspo oliobes uu
en
om
aan
e oon hoe
e wag e op imale esul a e onde myn wo d deu ak o e
wa i o ganisasie-oms andighede
an
ke nbelang is.
Hie die ak o e slui onde ande e o ganisasies uk uu -
eienskappe (di e ensiasie, ge"in eg ee de sis eme, mags-
e sp eiding, in e a hanklikheid
an
eenhede,
ens.),
beskik-
baa heid
an
inlig ing, pe soonlike waa des
an
bes uu de s,
e goedings elsels, ens.,
in.
Die
besp eking
an
hie die
elemen e wo d op olgend aangebied: Ee s ens 'n oo hoo se
benade ing o die basiese konsep e
an
die s a egiese
bes uu
an
p oduk-/besigheidspo olios; die algemene
bepe king op die no ma iewe- asionele oo e onde s ellings
in
e band me s a egiese besigheidseenhede-po olio-
bes uu , olg daa na. Laas ens wo d spesi ieke aandag
gewy
aan
indi iduele o ganisasie-
en
bes uu s ak o e soos
di s a egiese bes uu
in
gedi e si isee de maa skappye
be"in loed
en
die implikasies hie an i opbes uu .
S.-A . Tydsk . Bed y sl.
1985,
16:
18-
26
s.
Sbabalala
Depa men
o
Business S udies, Uni e si y
o
Zimbabwe,
Box
MP
167,
M . Pleasan , Ha a e, Zimbabwe
Accep ed July
1984
The basic concep o P oduc /Business
Po olio
managemen
The necessi y o conduc p oduc
o
business po olio
analysis
in s a egic co po a e planning, has been mo i a ed
by
he
ealiza ion
o
mul i-di isional co po a ions ha
i
is
mo e
impo an o op imize he o e all co po a e ea nings han jus
ea nings
o
di isions
o
businesses ope a ing
as
indi idual
elemen s
o
he co po a e 'oc opus'.
Mul i-di isional
o
mul i-p oduc s co po a ions
ha e
g own
in size mainly ia ei he in e nal g ow h
o
g ow h h ough
me ge s and acquisi ions.
To
manage mul i-di isional,
mul i-
business, o mul i-p oduc s co po a ions decen alized
o ganiza ion s uc u es
and
decision-making a e equi ed.
P incipally, inancially s ong co po a ions, usually
because
o
hei ma ke sha es, expe ience, and scale e ec s,
ha e
conside ed i p uden
o
di e si y hei business ope a ions
om hei ea lies bases o wi hs and h ea s, and o
seize
oppo uni ies p o ided by compe i ion, echnological
changes,
changes
in
demand, ma ke cha ac e is ics, e c.
Basically
he e
a e wo ypes
o
kinds
o
co po a e di e si ica ion,
namely
concen ic and conglome a e. The o me
is
also desc ibed
as ela ed di e si ica ion because he na u e
o
a ious
lines
o
businesses a e closely ela ed and usually keyed o common
echnology, cus ome usage, dis ibu ion, me hods o
ope a ion, manage ial know-how, e c. On he o he hand,
conglome a e di e si ica ion
is
'un ela ed
o
pu e
di e si i-
ca ion', whe eby he business elemen s ha e no ue s a egic
i
among hemsel es (Thompson & S ickland,
1980).
In
Zim-
babwe, co po a ions
like
Anglo-Ame ican, Del a Co po a ion,
Lon ho, and
TA
Holdings L d ha e ollowed conglome a e
di e si ica ion. Phillips Elec ical Company and Hunyani
Holdings ha e basically ollowed concen ic di e si ica ion.
The business acqui ed when co po a ions ollow
conglo-
me a e di e si ica ion s a egies a e usually expec ed o
mee
ce ain minimum s anda ds
o
p o i abili y, g ow h a e,
manage ial expe ise, e c.
The ac o s ha usually mo i a e co po a ions o pu sue
di e si ica ion s a egies a e nume ous, bu he ollowing
a e
impo an :
(i)
A desi e o s ike a ma ch be ween a cash- ich,
oppo uni y-poo company
and
an oppo uni y- ich,
cash-poo i m.
(ii)
To
en e p oduc /ma ke a eas wi h coun e seasonal
o
coun e cyclical sales pa e n so as o smoo hen
sales
pa e ns and p o i s.
(iii)
To
me ge an oppo uni y-poo , skill- ich company
wi h
an
oppo uni y- ich, skill-poo company.
(i )
To
s ike a ma iage be ween a highly le e aged
i m
and
S.
A .
J.
Bus. Mgm . 1985,
16(1)
a deb - ee i m so as o balance he capi al s uc u e
o
he o me and inc ease i s bo owing capaci y.
( )
To
mee he powe agg andizmen needs
o
some mem-
be s
o
op managemen .
( i)
To
exploi ma ke oppo uni ies, using he company's
dis inc i e compe ence
in
such a eas
as
echnology,
ma ke ing, aw ma e ials, human esou ces skills, e c.
(Thompson and S ickland,
1980).
Al hough
i
is
no he pu pose
o
his a icle o discuss he
p os and cons
o
conglome a e and concen ic di e si ica ion
s a egies,
i
can be s a ed, in passing, ha i a co po a ion
wan s
o
g ow om wha i can do be e and o main ain
i s dis inc i e compe ence, a concen ic di e si ica ion s a egy
has mo e o o e han a conglome a e one. This should no
be aken o mean ha he e can be no bene i s acc uing o
a co po a ion pu suing a conglome a e di e si ica ion s a egy,
such as imp o ed sales, p o i s, and g ow h owing o en e ing
businesses wi h be e economic po en ial han he exis ing
co po a e base business(es). The s abiliza ion
o
sales, p o i s
e c.
is
also a goal wo h pu suing.
The SBU s a e ic planning logic
The po olio planning app oach ep esen s an a emp o
achie e in eg a ed planning whe e he co po a ion
is
composed
o
sub-uni s, some imes e e ed o as s a egic business uni s
(SBUs). The unde lying objec i e
is
o p e en sub-uni s om
op imizing hei indi idual in e es s which may be sub-op imal
as a as he whole di e si ied co po a ion
is
conce ned.
The SBUs concep
o
planning ep esen s a b eak om a-
di ional planning as based on he p inciples ha : A di e si ied
co po a ion should be managed as a 'po olio'
o
businesses
o pu poses
o
achie ing he o e all co po a e s a egy. Each
business uni , which should be educeable o a uni se ing
a clea ly de ined p oduc -ma ke segmen , should pu sue a
clea ly de ined s a egy based on i s dis inc i e compe ence
in
he ma ke segmen
i
is
se ing, and his s a egy should
con ibu e owa ds he achie emen
o
he o e all co po a e
s a egy. 'The o al po olio
o
business should be managed
by
alloca ing capi al and manage ial esou ces o se e he
i m as a whole - o achie e balanced g ow h in sales,
ea nings, and asse mix a an accep able and con olled
le el
o
isk. In essence, he po olio should be designed and
managed o achie e he o e all co po a e s a egy' (Hall,
1978).
In discussing he p ocess and s uc u e
o
SBU
planning
he Ho e and Schendel (1978) app oach
is
going o be
ollowed.
Hie a chies o s a egy
In mul i-di isional o mul i-business co po a ion, s a egic
planning akes place a h ee le els, namely co po a e,
business, and unc ional le els. Ho e and Schendel
(1978)
iden i y ou componen s
o
any o ganiza ion s a egy, a ound
which he h ee
le els
o
s a egy can be cha ac e ized. These
componen s a e:
(i)
Scope
- he ex en
o
he o ganiza ion's p esen and
planned in e ac ions wi h i s en i onmen . This
is
he
o ganiza ion's mission o domain choice, which
is
inally
ep esen ed by i s p oduc /ma ke choice.
(ii)
Resou ces
De elopmen - his has o do wi h he
le el
and pa e ns
o
he o ganiza ion's pas and p esen
esou ce and skill deploymen s and how hese help he
o ganiza ions o achie e i s goals.
(iii)
Compe i i e
ad an ages
- he o ganiza ion's dis inc i e
compe ence which comes abou owing o i s unique
posi ions
is-a- is
i s compe i o s. The o ganiza ion o
19
company achie e i s compe i i e posi ion as a esul
o
i s scope decisions and i s pa e n
o
esou ces de elop-
men and deploymen .
(i )
Syne gy
- his
is
he join
o
assembly e ec s ha a e
sough om he o ganiza ion's esou ce deploymen
and/
o scope decisions.
Co po a e s a egy
A co po a e
le el
he scope componen
o
an o ganiza ion
s a egy
is
c i ically impo an . The ype
o
business(es) he
company would like o be in
is
he name
o
he game
a
his
le el. The nex mos impo an componen has o
do
wi h
esou ce deploymen among p oduc s/businesses. Compe i i e
ad an age and syne gy a e impo an o ela ed p oduc s
o
i ms, bu
less
so o he conglome a es. Wi h conglome a es
he syne gy
is
usually hough
o
in
e ms
o
how he di e en
i ms, p oduc s, e c. ein o ce each o he
in
sha ing co po a e
s a , inancial esou ces, and op managemen skills.
Co po a e manage s usually p esen hei s a egic s a e-
men s
in
he o m
o
inancial and non- inancial e ms, social
and e hical obliga ions
o
he co po a ion, and in he
speci ica ion
o
he cu en se
o
majo plans ha a e
o
be
pu sued (Vancil,
1976).
Among o he hings, co po a e
manage s y
o
achie e balanced p o i payo and business
isk, easibili y and consis ency
o
and among di e en
business/p oduc plans, and he speci ica ion
o
asks,
esponsibili ies and ime ables
o
s a egic planning cycles
co po a e-wide (Bales,
1977).
In using a po olio app oach o s a egic planning, ce ain
common s eps a e ollowed. These a e:
(i)
The es ablishmen
o
iden i ica ion
o
s a egic business
uni s. This in ol es he p ocess
o
agg ega ion and dis-
agg ega ion
o
co po a e ac i i ies. The essence
o
his
p ocess
is
o choose a
le el
o
agg ega ion
' ha
is
meaning ul s a egically, i.e., a
le el
a which plans a e
d awn up and implemen ed, and a which s a egic
decisions can be made ela i ely independen ly
o
s a egic
decisions o o he uni s.' (Abell & Hammond,
1979).
(ii)
The de e mina ion
o
business ac o s which a e
impo an bo h in assessing he cu en pe o mance
o
a p oduc /business planning uni and he p ojec ion
o
i s u u e pe o mance unde , say, no change in s a egy,
agg essi e s a egy, e c. The Bos on Consul ing
G oup
(BCG)
use
ela i e ma ke sha e, ma ke g ow h a e, and
cash e enue
low.
The BCG app oach
uses
a ou -squa e
g id p oduc /business po olio ma ix. Each co po a-
ion's p oduc /business
is
plo ed
in
he ma ix acco ding
o i s pe cen age g ow h a e in sales and i s ela i e
ma ke sha e posi ion. The
size
o
each ci cle in he ma ix
is
p opo ional o he sales e enue gene a ed
by
each
p oduc /business. Gene al Elec ic has de eloped a mo e
de ailed nine-cell po olio ma ix based on long- e m
p oduc -ma ke a ac i eness and business s eng h/ com-
pe i i e posi ion. P oduc -ma ke a ac i eness
is
aken
as
a composi e p ojec ion
o
ma ke size, ma ke g ow h
a e, compe i i e s uc u e, p o i abili y, echnological and
~ocial
impac s, e c. On he o he hand, business s eng h
o
compe i i e posi ion
is
aken o be a unc ion
o
ma ke
size
and g ow h a e, ma ke sha e, p o i abili y,
ma gins, echnology posi ion, skills, image, calib e
o
managemen , e c. (Hall,
1978).
Ho e sugges s a i een-
cell
ma ix
in
which businesses a e plo ed
in
e ms
o
hei
compe i i e
posi ion
and
hei
s age
o
p oduc /
ma ke e olu ion.
(iii)
Each s a egic planning uni
is
e alua ed in e ms
o
he
20
De e minan
In es men in ensi y
E ec
o
Impac
(a) As in es men in ensi y ises ROI
declines.
Ma ke
sha e
Ma ke
g ow h
a e
Li e cycle s a e
Ma ke ing expense/sales
(b)
La ge
in es men and high ma ke ing
in-
ensi y equals poo ROI.
(c) Capaci y u iliza ion
is
i al when ixed
capi al in ensi y
is
high.
(d)
High
capi al in ensi y and small ma ke
sha e equals disas e .
(a)
ROI
is
closely ela ed o ela i e ma ke
sha e.
(b) Ma ke sha e
is
mos p o i able
in
e i-
cally in eg a ed indus ies.
(c) High R & D spending dep esses ROI
when ma ke sha e
is
weak.
(d) Capaci y u iliza ion
is
mos impo an
o low-sha e business.
(e) Hea y ma ke ing dep esses ROI o low-
sha e business.
( )
Ma ke sha e and quali y a e pa ial sub-
s i u es o each o he .
(a) A apid a e
o
new
p oduc in oduc ion
in
as -g owing ma ke s dep esses
ROI.
(b) R &
Dis
mos p o i able
in
ma u e, slow-
g ow h ma ke s.
A na ow p oduc line, in ea ly
o
middle
s age
o
he li e cycle,
is
less p o i able han
a
la e s age.
(a) High R & D plus high ma ke ing de-
p esses ROI.
(b) High ma ke ing expendi u es dep esses
ROI especially when quali y
is
low.
F'agu e
1 De e minan s and impac s on ROI (Abell & Hammond,
1979).
De e minan
Rela i e ma ke sha e
In es men in ensi y
E ec o Impac
(a) High ela i e sha e imp o es cash now;
high g ow h dec eases i .
(b) High sha e and low in es men in ensi-
y p oduce cash. Low sha e and high in-
es men in ensi y esul in cash d ain.
(c) High ela i e sha e p oduces cash -es-
pecially when ma ke ing in ensi y
is
low.
(a)
Low
o
medium g ow h coupled wi h
low in es men in ensi y p oduces cash;
High g ow h coupled wi h high in es -
men in ensi y
is
a cash d ain.
(b) Ha es ing sha e when in es men in en-
si y
is
low p oduces cash; building sha e
when in es men in ensi y
is
high
is
a
cash d ain.
(c)
In es men plus ma ke ing in ensi y
esul s in cash d ain.
(d) Few new p oduc in oduc ions coupled
wi h low in es men in ensi y p oduces
cash.
F'agu e
2 De e minan
o
cash low (Abell & Hammond,
1979).
business ac o s indica ed
in
(ii) abo e. Figu es l and 2
show ac o s which ha e been ound by P o i Impac
o
Ma ke ing S a egy (PIMS)
in
U.S., o be impo an
in
in luencing he
le el
o
e u n on in es men (ROI) and
cash lows espec i ely.
(i ) Each s a egic planning uni
is
classi ied
in
acco dance
wi h i s posi ion when ea ed agains he business ac o s
indica ed. In he BCG po olio app oach he ollowing
classi ica ion
is
used:
(a) 'Dog' o
'Cash
ap'. This ep esen a s a egic
planning uni wi h low ma ke sha e
in
a
low
g ow h
ma ke .
(b)
'Cash
cow' o 'Bond'. Any
SBU
in
his ca ego y has
a la ge ma ke sha e
in
low g ow h a e ma ke .
S.-.· l .
l d,~ .
lkd yhl.
19X5,
16(1)
(c)
'Ques ion ma ks' o 'p oblem child en'. Any
SBU
in
his ca ego y
is
in
a high g ow h a e ma ke bu
enjoys a low sha e
o
he ma ke .
(d) 'S a s' o 'Sa ings accoun s'. SBU
in
his ca ego y
ha e high ma ke sha e
in
high g ow h a e ma ke s.
( )
The chosen business ac o s and he classi ica ion
o
SBUs
in o di e en ca ego ies b ing abou ce ain implied o
sugges ed s a egies ha should be applied o each plan-
ning uni . The usually implied o ecommendable
s a egic
handling
o
po olio SBU elemen s a e as ollows:
(a) 'Dogs' and 'cash cows' a e managed o sho - e m
cash low. In he long un, 'dogs' a e di es ed o
elimina ed, while 'cash cows' ul ima ely become
'dogs' as hei compe i i,e posi ion declines. 'Cash
cows' should make cash a ailable o he 'p oblem
child en' and 's a s'.
(b) 'Ques ion ma ks' mus ei he ge in o he 's a '
ca ego y
o
ge ou
o
he po olio.
(c)
'S a s' a e sho un cash consume s and a e managed
o long- e m posi ion. In he long un,
as
hei
segmen a ac i eness
o
g ow h a e ul ima ely
declines, hey
will
become 'cash cows' o suppo he
nex ound 's a s' (Hall,
1978).
Business le el s a egies
S a egy a his
le el
is
mos ly ocussed on how o compe e
in a pa icula indus y
o
p oduc /ma ke segmen . This
means ha dis inc i e compe ences and compe i i e ad an ages
a e usually mos impo an a his le el. Syne gy
is
sough
h ough he in eg a ion
o
di e en unc ional-a ea ac i i ies
wi hin an indi idual business. Policy/s a egic decisions
include
p oduc (s) line, ma ke de elopmen , dis ibu ion, esea ch
and de elopmen , human esou ces, majo manu ac u ing
sys em design, inance u iliza ion, e c. Resou ces ha e o
be
deployed among di e en unc ional a eas. The s a egic
managemen p ocess a his
le el
in ol es: Cu en assessmen
o
business s a us; gene a ing and e alua ing al e na i e
s a egies; and de eloping an ac ion p og amme o chosen
s a egy (Bales,
1977).
P o i economic analysis
The physical gene a ion
o
p oduc cos s and he de e -
mina ion
o
whe e economic le e age
lies
need o
be
ho oughly pe o med, gi en ha his in o ma ion
is
usually
hidden by inancial accoun ing sys ems. This in o ma ion
helps business manage s o conduc sensi i i y analysis o
possible a ia ions in olume, p ice, cos elemen s,
manu ac u ing acili ies and ope a ions, dis ibu ion, and
cus ome se icing equi emen s.
Segmen ing he ma ke
I he basic c i e ia
o
ma ke segmen a ion a e conside ed
me , business manage s
will
use di e en bases o
segmen
hei ma ke s, such as end-use applica ions
o
p oduc s,
use
indus ies and cus ome cha ac e is ics, p oduc pe o mance
cha ac e is ics, channels
o
dis ibu ion, e c.
All
ac o s ha a e likely o a ec di e en segmen s'
g ow h, p o i abili y, e c. a e de e mined and he ma ke ing
mix elemen s a e combined in he bes ways possible -
ways
ha
will
ha e ele an impac s on di e en ma ke
segmen s.
P o iling compe i o s and supplies
Compe i o s, p oduc a ibu es, ma ke ing le els,
likely
p oduc cos s and p o i abili y, p oduc de elopmen ,
and
echnological inno a ions a e all assessed. Possible eac ions
o
compe i o s o al e na i e easible s a egies adop able
by
S.
A .
J.
Bus. Mgm .
1985,
16(1)
co po a e businesses a e also de e mined.
Supplie s' po en ial beha iou s a e also impo an o be
aken in o accoun . This
will
include he inancial, ech-
nological, and manpowe capabili ies
o
supplie s. Added o
his, he possible emp a ions (wi h associa ed cos s)
o
supplie s o in eg a e o wa d a e
o
c i ical impo ance o
business manage s. Ha ing done all he necessa y analysis
business manage s e alua e possible s a egies
in
e ms
o
p o i s payo , in es men cos , easibili y, isk, and long- e m
impac
o
o e all co po a e heal h. In doing so, business
manage s speci y he isks and payo s p obabili ies associa ed
wi h each al e na i e s a egy and his in o ma ion
is
made
a ailable o op managemen a co po a e
le el.
Ha ing done all his
i
is
impo an ha business manage s
should also p o ide de ailed implemen a ion p og ammes o
chosen s a egies, indica ing, among o he hings, ecom-
mendable changes in o ganiza ion s uc u e, budge ing,
le els
o
manpowe u iliza ion and deploymen , acili ies in es -
men s, e c.
The scheme
o
analysis akes in o accoun he compe i i e
posi ion
o
a s a egic business uni (SBU), gi en he s age
o
ma ke e olu ion. Fo ins ance, a
SBU
in
a s ong -a e age
compe i i e posi ion a he de elopmen s age
o
ma ke
e olu ion needs o pu sue o he hings being equal, a sha e-
inc easing s a egy.
On
he o he hand a SBU
in
a s ong -
a e age compe i i e posi ion a he
ma u i y-
sa u a ion s age
o
ma ke e olu ion need o pu sue a p o i s a egy.
Func ional le el s a egy
A he unc ional le el he
key
emphasis
is
on he
maximiza ion
o
esou ce p oduc i i y. Syne gy and he
de elopmen
o
dis inc i e compe ence a e impo an s a egic
componen s. The unc ional-a ea manage s achie e syne gy
h ough he co-o dina ion and in eg a ion
o
ac i i ies wi hin
a single unc ion. A unc ional-a ea manage 's objec i es
migh include cos e ec i eness, p oduc i i y, quali y and
cus ome se ices, he a e
o
sales g ow h, managemen
o
company -dis ibu ion channels ela ionships, e c.
I
should
be app ecia ed ha he unc ional a ea
is
a he ac ion le el.
The business-le el s a egies and ul ima ely he co po a e plans
a e e ec i ely implemen ed a he unc ional
le el.
O ganiza ion
s uc u e
o
SBU
po olio
managemen
The business co po a ions, using po olio planning app oach,
ha e chosen s a egies
o
di e si ica ion (concen ic
o
con-
glome a e), wi h semi-au onomous s a egic uni s epo ing
o co po a e headqua e s and con o ming o b oad co po a e
objec i es
and
policies o pu poses
o
mee ing co po a e
s a egic business mission. Each s a egic business uni
is
usually headed by a gene al manage and pu sue i s own
business s a egy. Gene al manage s
o
s a egic business uni s
usually epo di ec ly o co po a e ice-p esiden s o g oup
gene al manage s who
in
u n epo o he chie execu i e
a co po a e le el. Typically he e
is
a co po a e s a egic
planning s a esponsible o co po a e s a egic planning.
The concep
o
esponsibili y accoun ing equi es ha each
manage should be held accoun able o he ac i i ies o e
which he has con ol. This
is
an ex ension
o
one
o
he
classical p inciples
o
o ganiza ion: Au ho i y should be equal
o esponsibili y.
S a egic business uni s a e usually o ganized as p o i
cen e s
o
in es men cen e s. P o esso Vancil dis inguishes
be ween he wo
as
ollows: P o i cen e s a e a eas whe e
he manage
is
esponsible o he bes combina ion
o
cos s
and e enues. His objec i es
is
o maximize he bo om line,
21
which
is
he p o i ha esul s om
his
decisions and decisions
execu ions. In es men cen e s a e uni s whe e he manage ,
in
addi ion o p o i -cen e esponsibili ies,
is
esponsible o
he magni ude
o
asse s employed. He
is
expec ed o make
ade-o s be ween cu en p o i s and in es men s o inc ease
u u e p o i s. The manage 's objec!i es unde in es men
cen e s
is
o
maximize
his
e u n on in es men s (Vancil,
1973).
The decen aliza ion
o
a signi ican amoun
o
decision-
making au ho i y unde di e si ied mul i-p oduc
o
mul i-
business co po a ions
is
a ionalized
on
he g ounds ha
gene al manage s
o
indi idual s a egic uni s a e in a be e
posi ion o choose he igh ma ke niches a hei espec i e
ma ke a eas, and a e in a be e posi ion o espond quickly
o compe i i e changes and o he ma ke dynamics. Di e si i-
ca ion and decen aliza ion educe he need o ga he and
p ocess in o ma ion a he co po a e op hie a chy, which
easily expe iences o e load and consequen ly he bu eauc a ic
delays
in
decision-making. S a egic business uni s o ganized
ei he a ound ma ke s, p oduc , o geog aphical ca ego ies
ep esen he c ea ion
o
sel -con ained asks. In o ma ion
ga he ed and p ocessed by sel -con ained uni s
is
less
in
bo h
quan i a i e and a iable e ms, and, acco dingly, mo e
eliable han
i
would be he case i he co po a ion as a whole
collec ed and p ocessed in o ma ion o
all
i s uni s ope a ing
a di e en ma ke en i onmen s. The co po a e s a essen-
ially esembles he c ea ion
o
la e al ela ions ha help o
see
o i ha all he sub-uni s
o
he co po a ion a e ocussed
o co po a e s a egic mission and also helps
o
handle
in o ma ion ga he ing and p ocessing o pu poses
o
coping
wi h unce ain y ac oss adi ional line-au ho i y ela ionships.
S a egic uni s may also ha e hei di isional-planning s a
wi h s a ela ionship o di isional manage s and unc ional
(do ed-line) ela ionship o co po a e s a (Galb ai h,
1973).
The
gene al
limi a ions
o
he
assump ions
o
po olio
s a egic
managemen
The op-down s a egic managemen p ocesses
in
di e si ied
co po a ions a e ep esen ed by he de elopmen
o
majo
co po a e goals and ma ching mas e co po a e s a egies.
On
he o he hand he bo om-up s a egic managemen p ocesses
a e ep esen ed by unc ional p og ammes and business/
di ision goals and s a egies which a e se wi hin he
pa ame e s
o
majo co po a e goals and mas e s a egies.
The ul ima e objec i es
o
such p ocesses a e ideally
o
come
ou wi h an op imal business po olio -well-balanced in
e ms
o
business uni s which should be p incipally balanced
a ound he 's a s' and 'cash cows'. Such a po olio ensu es
a di e si ied co po a ion wi h ela i ely high amoun s
o
in es able su plus cash owing o high ma ke sha e in low cos
s uc u es (and hence high cash low) om he 'cash cows'.
This su plus cash
is
made a ailable o high ma ke
sha e/
g ow h a e businesses as ep esen ed by 's a s'.
Fo he ideal op imal po olio o be a ainable wi h a high
le el
o
accep ance and sa is ac ion by a co po a ion's
membe s, he immanen decision-making p ocesses mus be
cha ac e ized
by
objec i i y in o ma ion adequacy, a ionali y
and he subo dina ion
o
indi idual manage s' in e es s and
goals o he in e es s and goals
o
he co po a ion
as
a whole.
Conce ning he o ganiza ion s uc u e, he implici assump-
ion
is
ha
i
ma ches he co po a ion's g ow h s a egies. This
is
o say ha s uc u e ollows he g ow h s a egy
o
he
co po a ion.
S a egy o mula ion
as
a poli ical p ocess
The abo e gene al assump ions
o
po olio s a egic

22
managemen ollow he classical no ma i e- a ional
m~~I
o
decision-making. Such a model does no ep esen
dec1s1on-
making in o ganiza ional se -ups.
I
is
a simplis ic
iew
o me ely eckon ha o ganiza ion
s uc u e ollows he g ow h s a egy
o
he i m. The cu en
s uc u e
o
a i m a any gi en ime
is
an embodimen
o
ins i u ionalized p e ious s a egy(ies).
I
also ep esen s he
oles
o
occupan s, powe , and in luence dis ibu ion. A any
gi en
ime he di e en membe s
o
he i m including ex e nal
s akeholde s a e di e en ially sa is ied wi h
i s
goals, s uc u e,
p ocesses, e c.
The ope a ional e ec
o
he abo e ac o s
is
ha any
signi ican change
in
s a egy, i
i
has o ake place a all,
has o be sponso ed by he dominan membe s, coali ions,
e c. ha a e ei he no sa is ied wi h he cu en s a e
o
a ai s
o
who pe cei e ha hei in e es would be u he sa e-
gua ded by ce ain s a egic changes. Those who s and o lose
as a esul
o
he change
o
he cu en s a egy would use
wha e e powe s, in luence, e c., hey ha e in he cu en
o ganiza ional amewo k o block, manipula e, es uc u e
he si ua ion, and in luence he pe cep ions
o
hei opponen s
as o wha bes should be done in s a egic e ms o he
company.
Unde hese ealis ic app ecia ions
o
he beha iou
o
membe s
o
o ganiza ions, he cu en s uc u e
will
no mally
in luence he adop ion
o
a new s a egy (Galb ai h &
Na hanson,
1978).
Pe e Lo ange illus iously sums up he abo e con en ion
when he obse ed ha : 'Because he cu en s uc u e and
p ocess
o
he i m e lec s a speci ic powe balance, s a egy
o mula ion and selec ion becomes essen ially a poli ical
in e ac ion among coali ions. In addi ion, he o ganisa ion
design p ocess and a iables de e mine he design
o
he
s a egic planning p ocess i sel .'
The con lic ual beha iou
o
o ganiza ional incumben s, as
depic ed in he abo e discussion ep esen s poli ical ac ions
and p ocesses. As MacMillan
(1978)
pu s
i
'a
poli ical ac ion
akes place when an ac o (pe son, g oup, o ganisa ion e c.)
ecognising ha he a ainmen
o
i s
goals
is
in luenced by
he beha iou
o
o he ac o s in he si ua ion, unde akes
ac ion agains he o he s o ensu e ha
i s
own goals a e
achie ed.'
Unless an o ganiza ional ole occupan has an o e -
whelming legi ima e au ho i y and powe o e all o he s (and
his
is
a e), he
o
she would en e in o coali ions wi h ole
occupan s who sha e he same
iews
a ound speci ied issues.
As a esul
o
membe ship o coali ions an indi idual
incumben wi hin he o ganiza ion ac s as
his
own agen ; agen
o
his/he coali ion; and as an agen
o
he o ganiza ion as
a whole. The upsho
o
his exposi ion
is
ha since s a egy-
making p ocesses a e essen ially decision-making (choice-
seeking p ocesses), he beha iou
o
pa icipan s
is
de e mined
o
in luenced by he pe cei ed impac
o
such choices o he
needs and in e es s
o
he 'p incipals' hey ep esen .
I
should be clea by now ha he assumed no ma i e-
a ional s a egic managemen ac ions and p ocesses o a ain
op imal business po olios may be un enable because
o
he
beha iou
o
ole occupan s wi hin o ganiza ional se ups. The
abo e discussion has been gene al: I has been a c i ique o
o. he gene al limi a ions
o
he assump ions
o
po olio
s a egic managemen . Wha ollows below
is
he discussion
o
speci ic ac ions, p ocesses, and sys ems associa ed wi h
s a egic managemen in di e si ied and SBU-s uc u ed
co po a ions.
S.-A . Tydsk . Bed y sl.
1985,
16(1)
The
speci ic
limi a ions
o
he
assump ions
o
po olio
s a egic
managemen
The limi a ions
o
SBU s a egic planning a e going o
be
discussed a ound he ollowing a eas: In o ma ion ga he ing
and p ocessing, he e alua ion and ewa ding
o
manage s,
o ganiza ional s igma
s
indi idual manage 's sel -concep s,
in a-o ganiza ional powe ela ionships, managemen s yles,
and co po a e cul u e.
In o ma ion ga he ing
and
p ocessing
Unde he a ional-no ma i e SBU concep
o
planning he
mul i-di isional co po a ion
is
assumed o ha e adequa e
in o ma ion-ga he ing and p ocessing capaci y no only o
e alua e each s a egic uni 's pe o mance bu also o e alua e
ma ke cha ac e is ics
o
each p oduc /business uni .
This
is
o say ha gene al manage s
o
p oduc /business
uni s ha e, oge he wi h hei planning s a , ho ough
knowledge
o
hei espec i e ma ke s. These manage s
impa ially and objec i ely epo abou hei p oduc s/
business ma ke s pe o mances. The e a e also implied ha -
monious wo king ela ionships be ween he co po a e s a
and gene al manage s
o
s a egic uni s and g oup
ice-
p esiden s
o
g oup manage s whene e such s uc u es
exis .
A numbe
o
s udies and cases ha e shown ha such assump-
ions a e an excep ion a he han a ule.
In
mos cases he
co po a e s a , which in some co po a ions ope a es a
conside able geog aphical dis ance om indi idual s a egic
uni s, does no ha e all he necessa y in o ma ion abou he
ma ke cha ac e is ics
o
each p oduc /business uni . Fu he -
mo e, co po a e s a and gene al manage s
o
indi idual
s a egic uni s a e usually locked
in
con lic s a ising om a
numbe
o
sou ces. Fo ins ance, co po a e s a
is
e alua ed
on he pe o mance
o
he whole co po a ion, while on he
o he hand, gene al manage s a e e alua ed on he pe -
o mance
o
hei indi idual p oduc s/businesses. The
co po a e s a
is
no conside ed neu al by he s a egic uni s'
gene al manage s, and since
i
engages
in
o ganiza ion
p ocesses ha a ec s he ca ee s
o
he manage s in ol ed,
he use ulness
o
co po a e s a
is
always calib a ed
in
pe sonal e ms by such manage s (Uy e hoe en, Acke man
& Rosenblum,
1977).
I
can be blun ly s a ed ha in o ma ion
made a ailable o co po a e s a o pu poses
o
e alua ing
pe o mances
o
indi idual p oduc /business as
well
as
ma ke
dynamics
is
always loaded wi h biases. The p ocess
is
u he
complica ed by he p ac ical p oblem
o
inding indispu able
disc iminan ac o s which unequi ocally disc imina e
be ween
a 's a ', 'cash cow',
'dog',
e c.
Fu he mo e,
i
can be s a ed ha he e a e di e en ypes
o
's a s', 'p oblem child en', 'dogs', e c.
Fo pu poses
o
achie ing economies
o
scale and espons-
ibili y alloca ion, in o ma ion-ga he ing and p ocessing
acili ies end o be cen alized unde he co po a e s a ac ing
as managemen in o ma ion sys em
(MIS)
pe sonnel. Since
he sou ces
o
co po a e in o ma ion pool a e he indi idual
s a egic planning uni s, co po a e planning s a and o he
MIS
s a , he e
is
a high possibili y
o
disc epancy be ween
in o ma ion held and used by SBUs, manage s, and ha
held
and used by he co po a e planning s a .
The unp edic abili y
o
compe i i e and complex en i on-
men s wi hin which mul i-di isional/SBU-s uc u ed co po a-
ions ope a e and he mul iplici y
o
con lic ing demands om
coali ions wi hin and wi hou he co po a ion p e en clea cu
solu ions o a ailable al e na i es.
'In
he absence
o
clea cu
solu ion, he chosen al e na i e
is
he esul
o
poli ical
p ocesses. The g ea e he ambigui y, he g ea e he in luence
S.
A .
J.
Bus. Mgm .
1985,
16(1)
o
poli ics
in
de e mining he ou come, and he g ea e he
in luence
o
he cu en dis ibu ion
o
powe ' (Galb ai h &
Na hanson, 1978).
The doc o ing
o
in o ma ion
by
sponso s
o
ce ain
s a egic choices, ac ing in hei iducia y oles as
ep esen a i es
o
di e en coali ions, makes an objec i e
e alua ion
o
p oposed ac ions di icul . In o ma ion
possessed by any coali ion
o
ep esen a i es
o
coali ions
is
used as a s a egic esou ce o e ec ua e p e e ed s a egic
op ions. In SHU/di isional-s uc u ed o ganiza ion an
objec i e e alua ion
o
s a egic p oposals
is
u he unde -
mined 'by he loss
o
in o ma ion as p oposals il e upwa d
h ough he o ganiza ional hie a chy' (Cohen & Cye ,
1973).
As in o ma ion embodied in s a egic o in es men p oposals
il e upwa ds om unc ional o co po a e
le els
o
di e si ied
co po a ions, he deg ees
o
eedom o uppe
le els
a e
educed. Du ing his 'selling p ocess' a numbe
o
c ucial
de ails conce ning p oposals, a ailable al e na i es, e c, a e
los .
In o ma ion-ga he ing and p ocessing ac i i ies ha e o he
c ucial oles and consequences o he op imali y
o
any
SBU
po olio. In o ma ion
is
equi ed o de e mine
SBU
bound-
a ies; e alua e cu en pe o mance
o
SBUs; classi y SBUs
wi hin he g ow h-sha e ma ixes; de e mine he goals and
s a egies o be pu sued by pa icula SBUs; de e mine he
amoun
o
esou ces o be made a ailable o di e en SBUs;
and speci y he pe o mance s anda ds agains which SBUs
manage s a e o be e alua ed.
The conclusion o be made he e
is
ha , wi h a special
emphasis on SHU/Di isional s uc u ed co po a ions, he
limi ed amoun
o
in o ma ion a ailable o co po a e op
managemen o guide he o e all beha iou
o
hei business
po olio's
is,
mo e o en han no , manipula ed and doc o ed.
Objec i i y and a ionali y may be los wi h he poli ical
whi lwind as coali ion compe e o o ganiza ional a en ion
and esou ces.
E alua ion
and
ewa ding o manage s
The logical e alua ion and ewa d sys em
o
manage s
o
'po olio uni s' should be he one using mul iple pe o mance
c i e ia, aking in o accoun di e en ia ed s a egic goals
ollowed
by
indi idual SBUs based on hei indi idual classi i-
ca ion. Each manage
o
a SBU should be e alua ed and
ewa ded on he basis
o
he a eas o e which he/she has
comple e con ol.
I
is
also impo an ha he e should be
a clea causali y ela ionship be ween indi idual SBUs
managemen decisions and hei esul s. The co po a e s a
and manage s (g oup ice-p esiden , g oup manage s,
execu i e p esiden s, inancial con olle s, e c.) should be
e alua ed and ewa ded on he basis
o
co po a e pe o mance
which essen ially
is
an agg ega e pe o manc
o
SBUs unde
he co po a ion
The e a e a numbe
o
p oblems associa ed
wi h
es ablishing
pe o mance c i e ia and he e alua ion
o
manage s a
di e en
le els
o
o ganiza ion s uc u e wi h, no only
unc ionally di e en ia ed esponsibili ies, bu di e en ia ed
uni s as well. Coupled wi h he p oblem indica ed abo e
is
he pe cep ion
o
each manage
as
o whe he he/she has
e ec i e con ol
o
decision-making p ocesses ha ul ima ely
a ec his/he pe o mance achie emen and consequen
ewa d.
I
is
also impo an o no e ha a ewa d sys em
is
pe asi e and should no be hough
o
only
in
e ms
o
dolla
sala ies, bonuses, e c. P omo ions (posi ions in he
o ganiza ion ha enhances p omo abili y), esou ce alloca ion,
uni classi ica ion, o ganiza ion s a us con e men , e c. need
23
o be aken in o accoun .
The
ew
ela ed issues indica ed abo e help o highligh he
mundane o ganiza ional expe iences
ha
manage ial
e alua ion and ewa ding p ocesses a e highly con o e sial
and poli ical wi hin o ganiza ions. The la ge a co po a ion
is, he mo e complica ed he in a-o ganiza ional poli ical
p ocesses o esou ces alloca ion, pe o mance c i e ia
de e mina ion, pe o mance e alua ion and consequen
ewa ding.
The epo ed p esen manage ial con ol and ewa d by
di e si ied co po a ions ollowing SBUs planning concep a e
epo ed o all wi hin he ollowing con inuum: A one
ex eme he e a e i ms ha ha e adop ed SBUs planning
concep bu
s ill
ewa d and p omo e manage s on adi ional
(single ac o c i e ion); a he o he end
o
he con inuum
a e companies like Gene al Elec ic (U.S.), which uses
di e en s anda ds o pe o mance measu emen . The e a e
p oblems
in
ei he ex eme, including wha e e combina ions
wi hin he con inuum. The single c i e ion adi ional
pe o mance-measu emen and ewa d sys em igno es he ac
ha di e en manage s a e assigned o pu sue di e en
s a egies, and ha di e en p oduc s/businesses ope a e a
di e en ma ke s; di e en p oduc s/businesses a e
in
indus ies (including echnology dimensions) ha di e in
esou ce combina ion o ce ain
le el
o
pe o mance, e c.
The mul i- ac o app oach b ings abou he p oblem
o
complexi y: Manage s
o
p oduc s/businesses ha mee he
p e e ed biases
o
op managemen based on he s a egic
co po a e mission a e likely o ha e p e e en ial ea men .
Fo ins ance, any op managemen which
is
e alua ed on
ea nings pe sha e
is
mo e likely o be ea nings-biased and
he manage s
o
p oduc s/businesses ha a e s a egic in
con ibu ing o co po a e ea nings a e likely o be ewa ded
mo e a ou ably; mo e esou ces
will
be alloca ed o hem
and he mobili y clus e s o p omo ion pu poses a e likely
o be aceable h ough he p e e ed p oduc /businesses.
Knowing wha ma e s o op managemen , SBU manage s
would ailo hei s a egic eques s o he in e es
o
op
managemen and no necessa ily o he in e es
o
hei uni s
and he op imali y equi emen
o
he co po a ion's business
po olio (Ca e ,
1971
).
In addi ion o he abo e compli-
ca ions, he e
is
a lo
o
subjec i i y in ol ed in any p ocess
ha ing o do wi h he de e mina ion
o
pe o mance s anda d
and pe o mance measu emen . The mul i- ac o app oach
is
mo e
likely
o enhance such subjec i i y han o educe i .
Las ly,
i
can be s a ed ha he manage ial beha iou al
ou come owing o ' ein o cemen dosses' consequen o he
mul i- ac o app oach
is
likely o make
i
di icul o ans e
manage s om one SBU o ano he . The igidi y
in
manage ial esou ces u iliza ion wi hin a conglome a e
co po a ion leads o sub-op imal u iliza ion
o
such sca ce
esou ces and
is
mo e likely o lead o a subop imal business
po olio.
O ganiza ional s igma
s
indi idual manage s' sel -
concep s
The a ional-no ma i e assump ion o implica ion
o
he
p oduc s/business po olio s a egic planning and manage-
men
is
ha all SBUs a e equally alued
by
he co po a ion
and, he e o e, hei classi ica ion o 's a s', 'dogs', e c.
is
only
o planning and posi ioning pu poses. I has al eady been
a gued ha op co po a e managemen ha e hei biases which
a e based on hei pe sonali ies, managemen
s yles,
unc ional
and educa ional backg ound, e alua ion sys em exe cised upon
hem, e c. I his
is
ue, an o ganiza ional s igma
o
being
24
a manage
o
a 's a '. A
'dog'
s igma may be incompa ible
wi h he sel -concep
o
g oup ice p esiden s
and
SBUs
gene al manage s. The e
is
also bound o be
job
secu i y
anxie y in he SBUs ha ha e been called upon o be ha es ed
o
di es ed. Fu he mo e, in s ongly unionized co po a ions
such s a egies a e likely o be esis ed
o
o
b ing abou a
lo
o
labou ela ions p oblems.
Unde hese condi ions SBU manage s and union leade s
will
engage in poli ical ac i i ies o ei he main ain p esen
SBUs classi ica ions
o
o
change hem depending
on
he ou -
comes
o
doing so.
In a-o ganiza ional powe ela ionships
An
o ganiza ion
is
a social sys em ypi ied by in e ela ed
beha iou s
o
indi iduals who pe o m asks ha ha e been
di e en ia ed in o se e al dis inc sub-sys ems. The concep
o
o ganiza ional powe
is
an
impo an one in he in e -
ela ionships
o
indi iduals
and
sub-uni s o ming he o al
o ganiza ional sys em. Powe
is
a social beha iou al concep
which
is
only ele an whe e di e en indi iduals, sub-uni s,
social sys ems, e c. ha e some ela ionships such ha he
beha iou al ou come
o
he de e minan
o
such beha iou
is
in luenced by such in e ela ionships. A social uni has
powe
on
he o he social uni i
i
signi ican ly de e mines
i s (o he uni ) beha iou (Hickson, Hinings, Lee, Schneck
& Pennings,
1971
).
In business co po a ions, indi iduals,
depa men s, di isions, s a egic business uni s, e c. wield
di e en o ganiza ional powe 'uni s'. Hickson, e al. (1971)
iden i ies h ee
impo an
in a-o ganiza ional powe
dimensions:
one uni a ec s he p obabili y
o
ano he beha ing in
a pa icula manne .
(ii) Domain. The numbe
o
uni s whose p obabili ies
o
beha ing in pa icula manne s a e a ec ed by one uni .
(iii) Scope. This has o
do
wi h he ange
o
a uni beha iou
ha
is
in luenced by ano he uni (s).
Di e en uni s ge hei powe based in o ganiza ions like
business co po a ions om:
(i) Cen ali y. The deg ee
o
which he ac i i ies
o
a uni
a e in e linked in o he o ganiza ion sys em. This has
o
do
wi h he impac
o
a uni 's ac i i ies
o
he ou pu
o
he o ganiza ion as a whole.
(ii) Subs i u abili y. This has
o
do
wi h whe he
o
no he
o ganiza ion can ob ain al e na i e pe o mance o
ac i i ies pe o med by a pa icula sub-uni .
(iii) Coping wi h unce ain y.
I
one sub-uni
is
esponsible
o coping wi h en i onmen al unce ain y o he bene i
o
o he s, i s powe base
will
inc ease.
The abo e powe bases ep esen s a egic powe esou ces
which, when applicable o a pa icula o ganiza ional si ua ion,
a e deployed by hei wielde s o induce
o
o coe ce,
o
o
esis inducemen s
o
coe cion om o he uni s (MacMillan,
1978).
The discussion abou in a-o ganiza ional powe
is
made
wo hwhile because he concep
o
SBU po olio analysis
and
managemen ends o assume away he exis ence
o
powe
con lic s wi hin di e si ied co po a ions.
I
is
assumed ha
business uni s classi ica ion
is
objec i ely a i ed a
and
ha
s a egies ollowed a e op imal o he co po a ion as a whole.
Typically i could be asked as
o
who
is
likely o be mo e
powe ul be ween gene al manage s ( ice p esiden s)
o
'cash
cows'
and
'dogs', 'dogs',
and
's a s'.
I
one s a egic uni
is
a supplie
o
in e media e goods o o he uni s, i s powe
(owing
o
i s cen ali y) in ela ion
o
ecipien s a egic uni s
is
mo e likely o be enhanced. I was also s a ed in his a icle
S.-A . Tydsk . Bed y sl. 1985,
16(1)
ha , in he e en
o
op
managemen being e alua ed and
ewa ded
on
ea nings pe sha e, s a egic uni s con ibu ing
mo e owa ds he o e all co po a e ea nings
will
wield mo e
powe because hey a e conside ed mo e c i ical by op
managemen . The a gumen submi ed
on
his issue
is
ha ,
because
o
in a-o ganiza ional powe ela ionship,
i
is
mo e
likely han no o ha e sub-op imal esou ce alloca ions wi hin
he p oduc /business po olio which would gene a e sub-
op imal co po a e po olio ea nings.
I
his happens he
e y
pu pose
o
p oduc /business
po olio
analysis and
managemen
will
be
de ea ed
o
unde mined.
Managemen s yles and co po a e cul u e
The di e si ica ion
o
co po a ion, especially when achie ed
h ough me ge s
and
acquisi ions, also en ails he en ance
o he co po a e (base business) cul u e
and
s yle
o
manage-
men by manage s wi h di e en managemen s yles and who
a e imbued wi h di e en 'cul u es'. Typically, some op
manage s
o
acqui ed businesses a e e ained
o
un he
acqui ed businesses as s a egic uni s wi hin he co po a e
business po olio. This
is
mo e so i he co po a ion ollowed
a conglome a e di e si ica ion s a egy. The equi ed o
implied managemen s yle which esul s om he classi ica ion
o
he acqui ed business wi hin he co po a e business
po olio ha e, in a numbe
o
epo ed cases, been ound
o be in con lic wi h he managemen s yle
o
manage s who
managed he business as a sepa a e en i y be o e acquisi ion.
Any a emp s o socialize hese manage s o he co po a e
s yle
o
managemen
and
ole p esc ip ion (a ising om s a egic
uni classi ica ion
in
he co po a e po olio) ha e been
esis ed
in a numbe
o
epo ed cases.
Di e ences
in
managemen s yles
and
in e es s
o
manage s
o
acqui ed
and
acqui ing businesses ha e also been a sou ce
o
con lic be ween co po a e
s a
o
he acqui ing i m and
manage s
o
acqui ed s a egic business uni s. I can
be
in e ed, he e o e, ha gi en he p oblems
o
socializing
e ained manage s
o
acqui ed businesses o he co po a e
(acqui ing co po a ion) s yle
o
managemen
and
cul u e, he
bene i s
o
p oduc /business
po olio
analysis
and
managemen migh ei he be delayed
o
ne e a ained.
The
in e en ionis
demand
o
ex e nal
cons i uences
The
h us
o
his a icle
is
o
deal wi h he beha iou
o
in e nal cons i uences as
i
a ec s he a ionali y
o
s a egy
making
in
di e si ied co po a ions. This app oach should no
be cons ued
o
mean ha he demands om ex e nal con-
s i uencies a e ela i ely unimpo an . In some cases ex e nal
demands ac ually dic a e easible s a egies
o
co po a ions.
This
is
he case e en in he celeb a ed p i a e-en e p ise
economies. The me e size
and
hence isibili y
o
di e si ied
conglome a es leads
o
a si ua ion whe eby he di e en uni s
o
he o ganiza ion in e ace wi h di e en ia ed sub-en i on-
men s whose s akes a e a ec ed posi i ely
o
nega i ely by
he co po a ion's goals, s a egies, policies,
and
ope a ions.
MacMillan ( 1978) ca ego ize in e es g oups ou side he
o ganiza ion in o symbion s
and
commensals. The o me
ep esen s hose elemen s
o
he en i onmen
on
which he
o ganiza ion
is
dependen o i s inpu s; and, he symbion s
in
um
depend upon he o ganiza ion
o
ake hei ou pu s.
The la e ca ego y ep esen s hose elemen s in he en i on-
men ha a e ying o a ac he o ganiza ion's symbion s.
While his ca ego iza ion se es a e y good pu pose as a
sho hand, he e
is
a need
o
ampli y he concep
o
inpu s
and
ou pu s as desc ibed in he o ganiza ion/symbion s
ela ionships. Inpu s inco po a e mo e han jus aw ma e ials,
S.
A .
J.
Bus. Mgm .
1985,
16(1)
human
esou ces, in es men s unds, e c. Accep ance,
ole a ion,
and
suppo
o
an
o ganiza ion's goals, s a egies,
and
ope a ions by symbion s a e impo an inpu s ha
co po a ions equi e. This
is
e en mo e impo an wi h big
isible co po a ions as exempli ied by conglome a es. Simila ly,
he ou pu s (which he o ganiza ion has
o
ake in o accoun
in i s s a egy-making p ocesses)
o
he symbion s include hei
goals, policies, s a egies,
and
ope a ions. They also include
symbion s' pe cei ed accep able no ms
o
beha iou o
socie al ins i u ions.
The
i e u able
and
con lic ing demands
o
powe ul
symbion s
may
cons i u e
p ima y
cons ain s
on
a
co po a ion. Goals se
and
s a egies o mula ed by he
a ec ed co po a ion a e mo e
o
a comp omise
o
ep esen
sequen ial a en ion
o
con lic ing demands. They a e by no
means op imal.
The
co po a ion
will
end
o
gene alize i s
policy commi men s so ha di e en symbion s 'can
see
some
scope o achie ing hei speci ic pu poses' (MacMillan,
1978).
In desc ibing
an
adap i e mode
o
s a egy making Hen y
Min zbe g (1973) cap u es he p oblem
o
di e si ied
co po a ions ying
o
mee mul iple and con lic ing demands
o
symbion s
and
in e nal coali ions. Min zbe g's desc ip ion
is
ha :
'The
adap i e o ganisa ion
is
caugh in a complex web
o
poli ical o ces. Unions, manage s, owne s, lobby g oups,
go e nmen agencies,
and
so
on,
each wi h hei own needs,
seek
o
in luence decisions. The e
is
no
one cen al sou ce
o
powe ,
no
one simple goal.
The
goals
o
he o ganisa ion
is
cha ac e ised by ba gaining among hese g oups, wi h each
winning some issues and losing o he s. Hence, he o ganisa ion
a ends
o
a whole a ay
o
goals sequen ially, igno ing he
inconsis encies
among
hem.
The
o ganisa ion canno make
decisions
o
"maximise"
any one goal such as p o i
o
g ow h; a he i mus seek solu ions
o
i s p oblems ha a e
good enough, ha sa is y he cons ain s'.
F om
his s udies, James Quinn (1980), p o ides easons
why execu i es
may
p e e no
o
announce speci ic goals as
assumed in no ma i e s a egy-making p ocesses. The op
execu i es in e iewed main ained ha he communica ion
o
speci ic goals leads o:
(i) Undesi ed cen aliza ion, since i has he e ec
o
elling
subo dina es ha ce ain issues a e
dosed
and ' ha hei
hough s
abou
al e na i es a e i ele an '.
(ii) Focus
o
opposi ion, o
i
may p o ide
an
o he wise
agmen ed opposi ion wi h ocal poin s o ally a ound.
(iii) Rigidi y, because he execu i e ego accompanying publicly
announced goals make
i
di icul o change hem.
(i ) Secu i y, conside a ion conce ning ela ion
o
he
company wi h i s compe i o s.
Quinn
(1980) also ound ha e ec i e manage s in la ge
o ganiza ions consciously
and
simul aneously y o in eg a e
in o ma ion -analysis, powe -poli ical, and o ganiza ional -
psychological 'p ocesses in o hei ac ions a a ious c ucial
s a es
o
s a egy de elopmen '.
The
conclusion
o
be d awn om he discussion so a
is
ai ly ob ious. When he in e nal cons i uences
o
coali ions
a e combined wi h ex e nal symbion s
and
he ac ions
o
com-
mensals, he a ional-no ma i e app oach in SBU po olio
s a egic managemen ep esen s
an
ideal o
an
app oxima ion
o
wha ac ually happens.
Implica ions
o
op
managemen
The main objec i e
o
his pape was o show how s uc u es,
p ocesses
and
sys ems as o ganiza ional a ibu es a ec
s a egy o mula ion
and
implemen a ion in di e si ied
co po a ions. These a ibu es, aken oge he wi h demands
25
om ex e nal coali ions, lead
o
poli ical beha iou
o
ole
occupan s. A his poin
ew
implica ions
o
such beha iou
o
op manage s
will
be men ioned, essen ially in passing.
I
is
impo an ha op manage s ha e o be ully cognizan
o
he ac ha o ganiza ional goals, s a egies,
and
policies
a e di e en ially p e e ed
o
anked by di e en membe s
o
he coali ion(s)
o
cons i uences. These pe cep ions lead
o
poli ical p ocesses. Such poli ical p ocesses a e 'spon aneous,
na u al, and necessa y phenomenon in he o ganisa ion'
(MacMillan, 1978). They ep esen he dynamics needed by
co po a ions
o
enhance hei in e nal capabili ies as hey
espond o ex e nal en i onmen al demands. Poli ical ac ions
and
p ocesses
do
no ep esen ana chy bu he dynamisms
ha a e c ucial o he su i al
o
any co po a ion.
In hei oles as s a egy a chi ec s, o ganiza ion builde s
and leade s,
op
manage s should be expe s
o
a leas
su icien ly ale abou he poli ical con ex wi hin which
indi idual subo dina e manage s play hei iducia y oles as
ep esen a i es
o
di e en hie a chies
o
coali ions.
Top manage s should be adep in s uc u ing
o
es uc u -
ing he si ua ion as
well
as incumben s' pe cep ions as
o
which
issues should ecei e wha p io i ies. This
is
o
say ha , since
coali ions de elop a ound ce ain issues, he ole
o
op
managemen
is
o s uc u e
o
es uc u e he condi ions wi hin
which issues a e de eloped
and
o
in luence he pe cep ion
o
ole occupan s as
o
which issues dese e p io i y con-
side a ions. Ha ing done so, he nex mo e
is
o
channel
poli ical p ocesses in he di ec ion ha sui s he o ganiza ion's
in e es .
To
manage a balance among cons aining
and
inconsis en
demands op manage s should u ilize he ools
o
comp omise
gene aliza ion
o
goals, and policy commi men s
o
sequen ially
a end o mo e complex
and
less
conc e e issues. In dealing
wi h ex e nal symbion s
and
commensals i
is
impo an
o
de e mine be o ehand possible coun e -s a egies om such
qua e s.
To
p edic such possible coun e -s a egies, op managemen
should possess in o ma ion abou alues
and
s uc u es
o
dominan coali ions wi hin he symbion s
and
commensals
o ganiza ions. I
is
impo an
o
de e mine he cu en
and
po en ial policy commi men s
o
he symbion s
and
com-
mensals; he al e na i es a ailable
o
hem;
and
he esou ces
a hei disposals.
Wi h such in o ma ion
op
managemen can de e mine
wi hin he law, ideology
and
e hics
o
he coun y, wha
op ions a e a ailable. These op ions would ange om accom-
moda ion Uoin commi men , co-op a ion,
and
coalescence)
o manipula ion (coe cion, inducemen , obliga ion,
and
pe suasion) (MacMillan, 1978).
Conclusion
In his a icle an a emp has
been
made
o
show ha he logic
and he expec ed op imal SBU po olios a e ha d
o
achie e
p incipally because
o
o ganiza ional a ibu es (s uc u e,
powe di e en ia ion, con lic ing in e es s, ewa ds,
and
in o ma ion sys ems, e c.) which in luence poli ical beha iou
o
ole incumben s. Goals, s a egies,
and
policies inally
a i ed a a e ei he gene alized
o
a e
no
mo e
han
com-
p omises. Owing
o
con lic ing demands om in e nal
and
ex e nal coali ions
and
he limi ed amoun
o
in o ma ion,
manage s can only sa is ice a he han maximize. The a ain-
men
o
op imal business po olios
is
ei he ha dly a ainable
o
is
a lee ing p ocess -once a ained i canno be
main ained as yes e day's lose s y
o
de elop new poli ical
s a egies aimed a e e sing pas losses.