Reference no: EM132803786

Conelli Sdn Bhd is a business organization with three divisions and a Head office. The divisions are based on market groupings, which are retail, wholesale and government. These divisions do not trade with each other. Each division is expected to earn a return on investment (ROI) of 15% per annum. The definition of return and capital employed is provided by the Head office, as is the criterion rate of 15%. Conelli Sdn Bhd as a whole has been able to earn 15% ROI but there have been wide variations between the results obtained by the different divisions. This infringes upon a policy that forbids cross-subsidization, which describes that each division must earn the stipulated ROI. Conelli Sdn Bhd is now considering divestment strategies and this could include the closure of one or more of its divisions. The Head office is aware that the Boston Product Market Portfolio Matrix (BPMPM) is widely used within the divisions in the formulation and review of marketing strategies. As it is so widely known within the group and is generally regarded by the divisions as being useful, the Head Office is considering employing this approach to assist in the divestment decision.

1) Evaluate Conelly Sdn Bhd use of the ROI and its policy that forbids cross-subsidization

2) Explain in detail the extent to which the BPMPM could be applied by Conelli Sdn Bhd in its divestment decision.

3) What is the appropriateness in the use of BPMPM to improve decision making?