BPSM - II

Submitted to: - KS Prasad Sir Submitted by: - Rohit Singh, 11M32, DIV - A, 4th SEM.

The challenges faced by ASHRIDGE PORTFOLIO MATRIX are: 1. Value or cost of the corporate parent: If the parent is not enhancing the performance of the business units, what is its role? A corporate body has a role to play with regard to purely corporate affairs, such as dealing with financial institutions and negotiating with governments. But if its role is limited to this, the cost of delivering these functions should be low to the business unit. A large and costly corporate headquarters that does little to enhance the strategies of its business units can be a great cost burden to them, thus undermining potential market based competitive advantage, and so reducing the overall returns for shareholders. 2. Understanding value creation at the business unit level: An overall pattern has emerged in the past decade or so which suggests that organizations throughout the world are attempting to drive responsibility for strategic decisions nearer and nearer to the markets. There is an attempt to

ensure that the business specific competences are directed at developing successful competitive strategies. The trend towards deregulation and privatization of public utilities and government authorities, increasing throughout the world, has a similar rationale underlying it. The aim is to give the responsibility for developing strategic capability and achieving competitive advantage in markets to the business- unit level to managers who are most closely in touch with their markets. The role of the parent has therefore been increasingly seen as one of facilitation, or of taking a hands off approach as far as possible.

3. Understanding value creation at the corporate level: If the corporate parent seeks to enhance the strategies of the business it must be very clear where and how it can add value. It must also avoid undertaking roles that do not enhance strategies at the business-unit level. For example, the corporate parent may impose cumbersome planning more to do with providing information to the centre than with aiding the strategic development of the units; it may retain a large head office staff which duplicate the roles of executives in business units; or it may make demands on business-unit strategy that are not sensible in terms of competitive strategy at that level. 4. Sufficient feel: If the corporate parent does, indeed, seek to enhance business strategies, it needs to consider the number of business units for which it can sensibly do so. For this the parent has to have sufficient feel for the businesses, so the number cannot be great unless they are similar businesses in terms of technology, products or capabilities; or in similar markets. 5. Reviewing the portfolio: The corporate parent should also assess which businesses should most sensibly be within its portfolio given these considerations.

Bibliography: 1.http://books.google.co.in/books?id=dXw6MkTCbeoC&pg=PA433&lpg=PA433&dq= is+ashridge+portfolio+matrix+better+than+others&source=bl&ots=8fqDGAGBR&sig=lTC0iODQSkuPd8i8zo7fxH0gZAk&hl=en&sa=X&ei=l04UZbhC4f4rQeHqoGQDQ&ved=0CEcQ6AEwBQ#v=onepage&q=is%20ashridge%20p ortfolio%20matrix%20better%20than%20others&f=false