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Effects of portfolio planning methods on decision making: experimental results

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  • Armstrong, J. Scott
  • Brodie, Roderick J.

Abstract

Subjects (n = 1015) working individually in the role of managers were asked to choose between investment opportunities that would either double their investment or cause the loss of half of it. Six administrators ran experiments on 27 occasions in six countries over a five-year period. Information about the BCG matrix increased the subjects' likelihood of selecting the project that was clearly less profitable. Of subjects exposed to the BCG matrix, 64% selected the unprofitable investment. Of subjects who used the BCG matrix in their analysis, 87% selected the less profitable investment.

Suggested Citation

  • Armstrong, J. Scott & Brodie, Roderick J., 1994. "Effects of portfolio planning methods on decision making: experimental results," MPRA Paper 81684, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:81684
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    1. Arkes, Hal R. & Dawes, Robyn M. & Christensen, Caryn, 1986. "Factors influencing the use of a decision rule in a probabilistic task," Organizational Behavior and Human Decision Processes, Elsevier, vol. 37(1), pages 93-110, February.
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    Cited by:

    1. Nudurupati, Sai Sudhakar & Bhattacharya, Arijit & Lascelles, David & Caton, Nicholas, 2015. "Strategic sourcing with multi-stakeholders through value co-creation: An evidence from global health care company," International Journal of Production Economics, Elsevier, vol. 166(C), pages 248-257.
    2. Florin Tudor Ionescu, 2011. "Boston Consulting Group II – A Business Portfolio Analysis Matrix," International Journal of Economic Practices and Theories, Academy of Economic Studies - Bucharest, Romania, vol. 1(2), pages 65-70, September.
    3. Juhi Gahlot Sarkar, 2019. "Managing brand strength in a brand portfolio: A conceptual analysis," Journal of Administrative and Business Studies, Professor Dr. Usman Raja, vol. 5(4), pages 219-227.
    4. de Villiers, Rouxelle & Woodside, Arch G. & Marshall, Roger, 2016. "Making tough decisions competently: Assessing the value of product portfolio planning methods, devil’s advocacy, group discussion, weighting priorities, and evidenced-based information," Journal of Business Research, Elsevier, vol. 69(8), pages 2849-2862.
    5. Paula Jarzabkowski & Sarah Kaplan, 2015. "Strategy tools-in-use: A framework for understanding “technologies of rationality” in practice," Strategic Management Journal, Wiley Blackwell, vol. 36(4), pages 537-558, April.
    6. JS Armstrong & Roderick J. Brodie, 2004. "Portfolio Planning Methods: Faulty Approach or Faulty Research? A Rejoinder to 'Making Better Decisions' by Wensley," General Economics and Teaching 0412017, University Library of Munich, Germany.
    7. Chang, Wen-Long & Chen, Shih-Ting, 2015. "The impact of World Café on entrepreneurial strategic planning capability," Journal of Business Research, Elsevier, vol. 68(6), pages 1283-1290.
    8. Woodside, Arch G., 2012. "Incompetency training: Theory, practice, and remedies," Journal of Business Research, Elsevier, vol. 65(3), pages 279-293.
    9. Mohajan, Haradhan, 2015. "Present and Future of Nestlé Bangladesh Limited," MPRA Paper 82850, University Library of Munich, Germany, revised 05 Apr 2015.
    10. Wetzstein, Anton & Hartmann, Evi & Benton jr., W.C. & Hohenstein, Nils-Ole, 2016. "A systematic assessment of supplier selection literature – State-of-the-art and future scope," International Journal of Production Economics, Elsevier, vol. 182(C), pages 304-323.
    11. Haradhan Kumar Mohajan, 2018. "An Analysis on BCG Growth Sharing Matrix," Noble International Journal of Business and Management Research, Noble Academic Publsiher, vol. 2(1), pages 1-6, January.
    12. Armstrong, J. Scott & Collopy, Fred, 1996. "Competitor Orientation: Effects of Objectives and Information on Managerial Decisions and Profitability," MPRA Paper 81676, University Library of Munich, Germany.
    13. Herbert Dawid & Marc Reimann, 2005. "Evaluating Market Attractiveness: Individual Incentives Versus Industry Profitability," Computational Economics, Springer;Society for Computational Economics, vol. 24(4), pages 321-355, June.
    14. Armstrong, J. Scott, 2003. "Discovery and communication of important marketing findings: Evidence and proposals," Journal of Business Research, Elsevier, vol. 56(1), pages 69-84, January.
    15. Kesten C. Green & J. Scott Armstrong, 2005. "Competitor-oriented Objectives: The Myth of Market Share," Monash Econometrics and Business Statistics Working Papers 17/05, Monash University, Department of Econometrics and Business Statistics.
    16. JS Armstrong & Fred Collopy, 2004. "Effects of Objectives and Information on Managerial Decisions and Profitability," General Economics and Teaching 0412014, University Library of Munich, Germany.
    17. Hanno Drews, 2008. "Abschied vom Marktwachstums-Marktanteils-Portfolio nach über 35 Jahren Einsatz? Eine kritische Überprüfung der BCG-Matrix," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 19(1), pages 39-57, May.
    18. Roger Marshall & David Bibby & Na WoonBong, 2013. "Making Sense of Complex Marketing Decision Systems: Decision System Analysis," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 12(2), pages 121-130, December.
    19. Nippa, Michael, 2011. "Zur Notwendigkeit des Corporate Portfolio Management: Eine Würdigung der wissenschaftlichen Forschung der letzten vier Jahrzehnte," Freiberg Working Papers 2011/02, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.

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    More about this item

    Keywords

    BCG matric; portfolio planning; marketing research;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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