Methods for resource allocation to SBUs

The methods for allocating resource allocation to SBUs can by :

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 each programme 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 future programme 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.