This research thesis investigates the nature of strategy formulation in diversified corporations. The thesis is structured in four chapters. The first chapter reviews conceptual issues related to the investigation. The review is chiefly based on the portfolio planning and business definition literature. The key conceptual findings are that both of the above areas seek to reduce complexity through the logical partitioning approach to classification.
The study uses logical partitioning as the basis of an alternative approach to portfolio planning for the formulation of strategy in diversified corporations. The alternative approach suggests that strategy comes about by answering the fundamental questions of: “what business are we currently in?" and “what business should we be in?". The structure through which answers are found to these questions is a hierarchical classification scheme of the elements of the universes of; products, customers, and administrative structures. The first chapter culminates with a prescriptive model of corporate business definition.
The second chapter of the thesis addresses theoretical and practical issues in developing a research methodology to guide the application of the corporate business definition model to the business of a particular corporation. It uses computer based transaction and customer records as a data source and develops an aggregative procedure for profiling areas of the corporation's business which the model suggests are of strategic significance.
The third chapter reports on the process of corporate business definition and the profile of the business of a particular corporation which resulted from the application of the model. The profiling started with units of analysis of customers and products (approximately 70,000 customers and several thousand products) and, by a process of aggregation, described the corporation's business in terms of: strategic market segments, customer functions served product-markets, and SBUs. Core competencies of the corporation and SBUs are deduced and strategic missions are suggested.
The fourth chapter gives concluding observations which discuss limitations in the model and research methodology, particularly with respect to incorporation of externalities in the model and the lack of operational definitions for many major concepts required. The final chapter also contains suggestions for future research and general conclusions.