Uncovering business portfolio transformation processes: Development of a metric to measure and quantify business portfolio transformations

Sebastian Schönhaar

No 2013/01, Freiberg Working Papers from TU Bergakademie Freiberg, Faculty of Economics and Business Administration

Abstract: Research on business portfolio restructuring has largely focused on antecedents and outcomes of single events such as acquisitions and divestitures, and on performance implications of diversification or refocusing strategies. Yet, longitudinal studies that investigate the transformation process of a business portfolio over time and its underlying strategic decision processes are rare due to a lack of an adequate metric that allows to measure and quantify major changes in a firm's business portfolio. The objective of this paper is to fill this gap through developing and proposing a systematic measurement system that allows to (a) identify firms that conduct a transformation of their business portfolio, (b) continuously measure the process and quantify the magnitude of a portfolio transformation, (c) measure both yearly and perennial changes in a business portfolio composition, and (d) determine a firm-individual transformation period with a clear transformation start date and end date. Furthermore, its practical applicability is illustrated based on a sample of the 100 largest European firms and with an in-depth analysis of Vivendi's business portfolio transformation from a construction to a media conglomerate. Concluding, further application areas of the metric as well as several directions for future research in this field are proposed.

Keywords: Business portfolio restructuring; Portfolio transformation; Strategy process; Transformation process; Transformation metric; Methodological study (search for similar items in EconPapers)
JEL-codes: L10 L25 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tufwps:201301

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