! !
! ! !
| "
#$| #" %
$ " &' ( ' )*+ +
|
, -! ! ./0 ! /0 ! +/$10 ! 2/ 0
ß ã
|3
$
#
+ 2
3.
(
ß3&
-4
-4
-4
53#
)
"
*
, 1
63# ,
ß
-
' #
)
)/20
; ,
)
7
)
)
)
8 ,
9 , :
-2
5
4 -#
# )
,
6
!
, +.2
< -2
- ,
7
+
7 )
m
, , +
|3 3 ß3 53 63 m3 ý3 =3
) ./0 &2 -4 ý
/ 0 |3 3 ß3 53 63 m3
'" '
2 & ý3 +2 =3 * >3 + |?3 " ||3 @@ | 3 . =
_ ! ! + $ 2$ " >
_ !
4 where how @ ß ! ! ) ! *
)$$ $"$ 3This is because Corporate HQ, in the related diversified firm, has the ability to transfer core competencies from one business unit to another3 |?
_ !
4 ß &
)
*
-
& 2
+"
9$-
,$
+
,
||
_ ! *4 7 |0 0 &"7* '7 +, & 882 2 7* 7*
|
_ ! 7! 7 D
( D
D AB
AC2B
A B
A.B (
( D
( |ß
_ ! 7! + &," )7 D
#
(
9 ðnvest Strongly
9 ðnvest Selectively
9 ðnvest Selectively
Earn/ Protect
,
( Harvest/ Divest
Earn/ Protect
: 2 Dominate/ Delay/Divest ( Harvest/ Divest ( Harvest/ Divest
92 7
|5
_ ! ß1! ! 9: ! D7*": ! 97*%:
, ! #<
|6
_ ! # ! ,6 Threat of +
Bargaining Power
ðntensity of #
Bargaining power
Threat From |m
_ ! # ! ,6 ß ! 6 2@6 ! .6 ! *
|ý
_ ! ! ,
&6 " )! 8 |=
_ ! ! ,
44 .
.
(
244 &4
#
# ã |>
_ ! ! <
< # ") &< 22 3 ?
_ ! ! < , .
2
8 (
E4 -$D)$#&
|
_ ! ! <
-$21! |3 $/0: 3 /0 : ß3 /0: 53 |$ ß:
7$ $7*44 3
# 24 #$ 1!
924 :
:
ß
# -') (- &')
+"
#
92! 2 ' # ,
-') ( ' &)'(;&+
)! ,$ $ 5
4 -
' #
)
)/20
; ,
)
7
)
)
)
8 ,
9 , :
-2
6
! "# $
+'
2
,|
,
,ß
)
)7
)
m
! #
+'
7*F
7*;
,
7*G
2
,
2
,
2
ý
! # %
+"'
-
-7
-
,F
,;
,G
=
Ä &
. 7*4 3D 3 &
>
-
. , ,
/0 .
ß?
)
$ .
3 & ß|
&7* !
7* 7*
7* 7*
ß
! $7* 4 77* ! 7
) 4 7
) /) 0 3 ) ) "
ßß
) !
) 3* $/0 /0
#
' 92
) AB
ß5
) !
)
# 3- "$ 1
ß6
) ! ! ++
+ )
+doing things right) + ) %doing right things) & %"@) , /0 /0
ßm
) 4 & '
# /0
' 92 /0
+"! -
v vvv vãv v v v
E4 |3# 3' ß3'
ßý
) 4 & '
#
' 92
/0
/0
+"! ).-
vÄ "' vãv v v v
ß=
) 4 & #
# / 0
' 92 /0
+"! 2-
vv _v v v
ß>
) 4 & #
#
' 92
/0
/0
+"! 7*
ãÄ$ v v
5?
) 4 & ,
# /0
'
/0
+"! 7*
vv v v
5|
)! " ,
++
.+
+
.
#84 8
'
'
7
7 2
7
7
. / 0 7AB
. / 0 .2 /% @0
-
.
"
5
)! , ,
,
)
"3
"3
#84 8
' /0 /"0
' /0 /"0
7
2
" "
"
5ß
) ! .+ %
7! 2 &2 ! 7'1 #7 G77
! &-! ! .2 55
) !
!
. (2
7
AB . H
56
) ! ).!$
. (2
7 '). 7! ! ! ! ). I). -$4 -$
, 81" ! )."$ )
+/ 0 5m
) ! 2 !
(
&) " "
2!
$ AB 2"I 2" A'4B 5ý
) ! ,
2 4
5=
) ! ,
#1 C2 DC442 + & + # & 5>
) ! ,
.
( )1 #DC #4
4 &4 6?
) ! ,
! !
.
,7& , &
6|
) ! #
.
4 actual cash held at HQ much less than that would have been required as an independent company )! whether to include at SP or COGS? #! how to deal with creditors? 92 ! treatment of current liabilities ± 2 extreme treatments -" ! which value to consider? Problems with depreciation (! preference for leased assets over owned assets so as to reduce capital charge #! exclusion from computation of assets employed #! Capitalization of items like R & D and its repercussion on EVA ± if capitalized, very less incentive to cut such expenditure as it would only reduce a part of if by way of capital charge
6
)! , #! )'#8+< ,
)#
+<
)# 3
+< 2 3
)#3 3
+< 3# ,&"3
+< )#
+< )#
,
<- |???$)# +<
<- |???$)# +<
)#
+< 6ß
)! ,#! )#
)# ! #! )#3 ! $ ! #
65
)! ,#! +< )#
5 ! +< $2)#2 )#/ ?I0)#/ß?I0 /|?I03Roð creates a bias towards little or no expansion in high-profit business units while at the same time low-profit units are making investments at rates of returns well below those rejected by high-profit units
.
! *)#3& +< 3 ! .3-2$ 39)#3 ! +< )# %23&7* $+< 3
66
,, |3 ) 3 . ß3 - 53 63 m3 -
6m
7! 7 ' 7. 7
# # ) 7 , ,
6ý
7! & ! &
-"" - #G7
$1$2
# ! # ! # ! #3< 23 ! #44 2
6=
7! G #$G77 /de novo0 1 &G77 122! should the activity under review be performed at all? What should the quality level be? # 3D3
6>
&,4 # $2 3 & 3 '&,! &7* & &7*% #
m?
&,4 -&, 23 ! 2 &4 #" &,$ &4! &,4 "3 &2 42
m|
&,4
!
,! ! |3 ,2 3 7* , 23
2
m
&,4 Comparative usage of the TP methods by fortune 1000 Companies as per survey by Vijay Govindarajan
:
mß
&,4
!
.,/ 0
7 .DC & 2
m5
, ! 7
.J ,2! J) %
-
&
# # -
- m6
, ! 7 ! .4 ,
-
4
& "
& "
+"
)#$+< $,
$ +
.
&1
#1 1
.
1$
1 $ 3 D 7 3 mm
7 / 7 04 $7 7 42 8 3&3- "$ ! &1'D 3 7 3 # 7 E4 ! ! ! ! !
-4 , 2 ," +44
mý
7 / 7 04 ,
&
7
J
$
$
7'D
D$( D
7
(
)
)
( @'D
@'D
m=
.1 ( 4
! & m>
! ,
, ' 2
, , &,
, ý?
! -
& )2 &
ý|
! D '
.
" &4 , #1
71$
D112 - " ý
! '
-
, ' ýß
2$ 8 2 &2$ $$3, 3
23 2 2 3- 3
ý5
! . ,
-
#
,
&
&2
&2 2
& 2
C
C# 9
7
7
77 .
7
3 2 3
'
3 ' 3
*3
'3
+ ,8 $ $
+
+ ý6
$$ 3 & 2$ 2$ 3 4 2"3 D213 # 2 3
ým