The Shell directional policy matrix - Marketing Management

A somewhat similar approach to the GE business screen is the Shell directional policy matrix. This approach also has two dimensions: company’s competitive capabilities (vertical axis) and prospects for sector profitability (horizontal axis). The firm’s SBUs or products are plotted into one of the nine cells and subsequently there is a suggested strategy for each of the nine cells. The cells represent, starting at the bottom right hand corner:

  • Leader where major resources are focused on the SBU.
  • Try harder might be vulnerable over longer periods of time, but OK now.
  • Double or quit gamble on potential SBUs for the future.
  • Growth grow the market by focusing some resources here.
  • Custodial like a cash cow, milk it and do not commit more resources.
  • Cash generation milk for expansion elsewhere.
  • Phased withdrawal move cash to SBUs with greater potential.
  • Divest liquidate or move these assets on as fast as possible.

There follows a description of how to complete the matrix and what each of the horizontal and vertical axes in the model mean.

The horizontal axis: prospects for sector profitability

This includes criteria of market growth rate, market quality, industry situation and environmental considerations. On each of these factors an SBU or product is given from one to five stars. For instance, the factor of ‘market quality’ might be judged on the basis of several criteria such as pricing behaviour, past stability or profitability of that sector. The qualitative or quantitative evaluation of market quality is then converted into a rating from nought to four. The same procedure is followed for each of the other three factors, so the overall score on sector profitability is the total of the ratings on all four factors.

The vertical axis: company’s competitive capability

The same approach is used here, except that the company’s capabilities are assessed on the basis of market position, product research and development and production capability. These are further divided into sub-factors applicable to any particular industry.

Shell emphasize that whatever strategy is eventually selected, the aim is that is should be ‘resilient’, i.e. viable in a diverse range of potential futures. Hence, each strategy ideally should be evaluated against all future possible scenarios.

Shell Directional Policy Matrix Examples

The Shell directional policy matrix

Shell directional policy matrix

Limitations of the Shell directional policy matrix

The Shell directional policy matrix has been criticized on the grounds that, like the BCG approach, it assumes that the same set of factors is universally applicable for assessing the prospects of any product or business. Critics believe that the relevant factors and their relative importance will vary both according to the firm’s products and the individual characteristics of each company. In addition, the matrix does not provide any guidelines on how to implement the strategies suggested in each cell of the matrix.

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