Shell’s Directional Policy Matrix (DPM)

The Shell Directional Policy Matrix (DPM) is another refinement upon the Boston Consulting Group (BCG) Matrix. Along the horizontal axis are prospects for business sector profitability, and along the vertical axis is a company’s competitive capability. Business sector profitability includes the size of the market, expected growth, lack of competition, profit margins within the market and other favorable political and socio-economic conditions. On the other hand company’s competitive capability  is determined by the sales volume, the products reputation, reliability of service and competitive pricing. As with the GE Business Screen the location of a Strategic Business Unit (SBU) in any cell of the matrix implies different strategic decisions.… Read the rest

Parenting Fit Matrix

Normally multibusiness companies comprise two elements: business units, which could  theoretically be independent companies, relating directly to the capital markets; and one or more layers of other  line and staff managers above or outside the businesses, which we refer to collectively as “the parent”. The businesses are directly involved in value creation: they produce goods and services and attempt to sell them for more than their cost. But the parent is involved much less directly. Its ability to create value depends  largely on its influence on the businesses and the way it supports them.

The parent acts as an intermediary between the businesses and outside investors.… Read the rest

Porter’s Model of the Five Competitive Forces

The nature of competition in an industry in large part determines the content of strategy, especially business-level strategy. Based as it is on the fundamental economics of the industry, the very profit potential of an industry is determined by competitive interactions. Where these interactions are intense, profits tend to be whittled away by the activities of competing. Where they are mild and competitors appear docile, profit potential tends to be high. Yet a full understanding of the elements of competition within an industry is easy to overlook and often difficult to comprehend.

Porter’s Competitive Forces Model  is one of the most recognized framework for the analysis of business strategy.… Read the rest

PEST Analysis – External Business Environment Analysis

A PEST analysis is a way to analyze the general external environment of an organization. Every organization has an external environment. The external environment is quite important because it is the environment in which a company operates. PEST analysis is a useful tool for understanding the “big picture” of the environment in which industry is operating, and environmental understanding will bring the advantage of the opportunities and guide to minimize the threats. PEST components are Political, Economic, Social and Technological.

The PEST analysis is used to identify forces in the macro-environment that are affecting the business at present and are likely to continue to affect the business in the future.… Read the rest