Stratport: A Model for the Evaluation and Formulation of Business Portfolio Strategies

A decision support system to evaluate and formulate business portfolio strategies is proposed. Strategies are expressed in terms of market share objectives to be achieved in each of the N business units in the portfolio. STRATPORT evaluates a strategy in terms of the net present value of its after-tax cash flows in the long term as well as its short-term net cash flow implications. Risk considerations are incorporated as per the Capital Asset Pricing Model. The model explicitly considers marketing investment, capacity expenditures, working capital and the impact of “experience” on costs and revenues over a time horizon. The formulation of strategy is accomplished by maximizing long-term profit subject to a short-term net cash flow limit, with the maximization repeated over a range of values for the short-term net cash flow limit. The use of the Generalized Lagrange Multiplier permits the simultaneous optimization of N market shares to be accomplished more efficiently by N univariate maximizations. Although the function that is maximized in the univariate maximization is not unimodal, the newly proposed procedure guarantees that a global maximum will be found. Limitations of the model and some extensions to minimize their impact are discussed.

• 저널Management Science · 28(9) · 979–1001
• 토픽Financial Markets and Investment Strategies · Finance
• DOI10.1287/mnsc.28.9.979
• 저자Jean-Claude Larréché, V. Srinivasan