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Resource Allocation and Methods of Resource Allocation - Planning And Resources Allocation

   Posted On :  26.06.2018 11:39 pm

The resources may be existing with a company or many be acquired through capital allocation.

Resource Allocation

 
The resources may be existing with a company or many be acquired through capital allocation. Resources include physical, financial and human resources essential for implementing plans.
 
Resources are broadly of four categories.
 
1.      Money
 
2.      Facilities and equipments
 
3.      Materials, supplies and services
 
4.      Personnel
 
Decisions involved in allocation of resources have vital significance in strategy implementation. In single product firms it may involve assessment of the resource needs of different functional departments. In the multi divisional organization it implies assessing the resource needs of different SBUs (discussed in lesson 4 of Unit I) or product divisions
 
Redeployment or reallocation of resources becomes necessary when changes take place. The redeployment of resources is quite critical when there are major changes and shifts in strategic posture of company. Redeployment of resources may arise due to strategies of a company to grow in certain areas and withdraw from the other.
 

Methods of Resource Allocation

 

Based on Percentages

 
Usually, companies have been following system of allocation of resources by percentages.
 
The following arguments reject this method.

It may not serve much purpose these days. They may be of help only in making some comparisons.
 
The allocation of resources should not be based on their availability or scarcity as it may prove to be counter productive.
 
The resource allocation should be made with regard to strategies of a company for its future competitive position and growth. The decisions of resource allocation are also closely connected with the objectives of a company.
 

Based on Modern Methods

 
Other methods include -Portfolio models, product life-cycle charts, balance sheets, profit and loss statements income statements. When retrenchment or turnaround strategies are implemented zero-based budgeting is used. During mergers, acquisitions and expansion, capital budgeting techniques are suggested.
 
Resource allocation is not purely a rational technique but is based on several behavioral and political considerations. The other analytical conceptual models used for strategic choice are growth share matrix, ‘stop light’, and Directional Policy Matrix used in multi divisional firms.
 
A more comprehensive approach to management decisions on resource allocation is provided by the budgeting system carefully geared to the chosen strategy. 
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