Assigning Resources to Each SBU21
Once it has defined SBUs, management must decide how to allocate corporate resources to each.
Several portfolio-planning models provide ways to make investment decisions. The GE/McKinsey
Matrix classifies each SBU by the extent of its competitive advantage and the attractiveness of its
industry. Management can decide to grow, “harvest” or draw cash from, or hold on to the business.
Another model, BCG’s Growth-Share Matrix, uses relative market share and annual rate of market
growth as criteria to make investment decisions, classifying SBUs as dogs, cash cows, question
marks, and stars.
Portfolio-planning models like these have fallen out of favor as oversimplified and subjective.
Newer methods rely on shareholder value analysis, and on whether the market value of a company
is greater with an SBU or without it (whether it is sold or spun off). These value calculations assess
the potential of a business based on growth opportunities from global expansion, repositioning or
retargeting, and strategic outsourcing