The following methods can be used for allocating
resource allocation to SBUs :
1. Strategic
budgeting :The SBU managers
prepare operational plans and targets.They are coordinated with corporate
objectives and plane.The strategic budget is prepared and presented to top
management for approval.This budget allocated resources to SBU.
2. Capital budgeting based resources allocation:This
methods is used to allocated resources to SBUs for new
capital project.It use the technology of pay back period,internal rate of
return and discounted cash flow.Time value allocated on the basis of approved
capital budget.
3. Programme budgeting based resource allocation:The resource
allocation is made to various approved future programmes of SBUs.Objectives,costs and likely impact of eachprogramme are carefully specified.It is also known as PPBS (Planing programing budgeting system).
4. Zero
based budgeting resource allocation:The SBU budget
start from zero base.Each futureprogramme has to be
justified in term of benefits and costs to warrant allocation of resources.Low
priority activities are eliminated.
5. BCG matrix based resource allocation:This matrix is used for resource allocation to SBUs. Based on
relative market share and market growth rate,the SBUs are classified into
"stars","question marks","cash
cows"and"dogs". Stars and question marks SBUs are allocated
more resources to build and sustain market share.Cash cows are allocated
present level of resources to defined and preserve market share.Dogs to
not get any resources.They are liquidated.
6. Product life cycle based
resource allocation :Resource allocation is liked to different stages in the
life cycle of SBUs products.The
stages can be introduction,growth,maturity
and decline.More resources are allocated at introduction and growth
stages less resources are allocated at maturity stage.The product in
phased out at decline stage and receive no resources
allocation.
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