Financial Portfolio In our Strategy! simulation, we beg

Strategy for Investment/Divestment Decisions

When considering the decisions for the next quarter, we evaluated each SBU's return on assets (ROA) with the industry average, seeking higher returns than the industry as a whole. While lower returns did not mean that we would immediately divest or liquidate the SBU, continued lower returns did make the SBU a candidate for such action.

Another measure which was taken into account is that of capacity. If capacity was less than 90 percent, we would divest. If capacity was greater than 90 percent, we invested. This represents building up SBUs who had potential to offer additional returns, while resisting the temptation to put additional monies in SBUs which may be short-lived.

Strategic decisions, such as differentiation or low-cost, were then applied to the SBU in question, and the appropriate action taken. Our simulation resulted in the liquidation of some SBUs, and the creation of o

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in Quarter 7. With this type of cost structure, we were unable to weather the severe downturn in sales in Quarter 8. We liquidated this SBU in Quarter 9. SBU Analysis - Retail Toy Store The asset value of our retail toy store SBU fell 29 percent over the simulation. By the end of Quarter 11, the SBU had posted losses for three straight quarters, although sales had increased from Quarter 10 to Quarter 11. Cost of goods sold remained high (in the mid-60s, as a percentage of sales) throughout the simulation, with the exception of one quarter. Total expenses also crept up, from the low 20s (as a percentage of sales) in the beginning of the simulation to the high 40s and low 50s by the end of the simulation. Part of the problem that was experienced in this SBU was the lack of a coherent strategy. For five quarters, no strategy was effectively implemented, while for the remaining five quarters, three different strategies were tried. The first formal strategy was that of focus with differentiation, which emphasizes product development and focused promotion. This moved into a differentiation strategy, which is a natural progression that transforms focused promotions to mass marketing. From here, there was one quarter when the
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Approximate Word count = 2541
Approximate Pages = 10 (250 words per page)