The ADL Matrix or Arthur D Little Strategic Condition Matrix is a Portfolio Management technique that is based on the Product Life Cycle (PLC). It is developed in the 1980’s by Arthur D. Little, Inc. (ADL), one of the best-known consulting firms, intended to help a company manage its collection of product businesses as a portfolio. Like other portfolio planning matrices, the ADL matrix represents a company’s various businesses in a 2-dimensional matrix. It is a structured methodology for consideration of strategies which are dependent on the life cycle of the industry. The ADL approach uses the dimensions of environment assessment and business – strength assessment ie. Competitive Position and Industry Maturity. The environment assessment is an identification of the industry’s life cycle and the business strength assessment is a categorization of the company’s SBU’s into one of five competitive positions, these five competitive positions by four life cycle stages. Continue reading
Strategic Management Concepts
Michael Porter’s Four Corners Model
Profiling a specific competitor is often important to management. However, many competitive profiles will fail to give management insights into how competitors will respond to your own strategy. Understanding this inter-relationship is important for knowing how to position your company in relation to the competition. One of the most popular models for this type of competitor analysis is the so-called Four Corners Analysis. The Four Corners Analysis developed by Harvard Business School professor and strategy guru Michael Porter is a model well designed to help company strategists assess a competitor’s intent and objectives, and the strengths it is using to achieve them. By examining a competitor’s current strategy, future goals, assumptions about the market, and core capabilities, the Four Corners Model helps analysts address four core questions: What drives the competitor? Look for drivers at various levels and dimensions so you can gain insights into future goals. What is Continue reading
Capacity Expansion Strategy
Growing an existing business often involves expansion of capacity, in terms of plant, human resources, technological infrastructure, R&D facilities, etc. Any major capacity expansion is a strategic decision that involves significant resource commitments and is often difficult to reverse. So such a decision has to be made carefully. Capacity expansion strategy is often narrowly applied to manufacturing. But in many businesses, there is no or little manufacturing. So, capacity needs to be understood in terms of the investments made in the most critical area of the value chain. Thus, in the pharmaceutical industry, capacity has to be defined in terms of scientific manpower and sales force. In a software development company, capacity has to be understood in terms of the number of programmers employed. In a Business School, capacity may be defined as the number of professors available to teach students. According to Michael Porter, the decision to expand capacity Continue reading
SWOT Analysis – A Strategic Planning Tool
SWOT is an acronym for internal Strength (S) and Weakness (W) of an organization, and external Opportunities (O) and Threats (T) facing that organization. A merging of the organization’s resources with the opportunities in the environment results in an assessment of the organization’s opportunities. This merging is frequently called SWOT analysis because it brings together the organization’s Strengths, Weakness, Opportunities, and Threats in order to identify a strategic niche that the organization can exploit. SWOT analysis provides information that is helpful in matching the firms’ resources and capabilities to the competitive environment in which it operates and is therefore an important contribution to the strategic planning process. Having completed the SWOT analysis, the organization reassesses its mission and objectives. In the light of the SWOT analysis and identification of the organization’s opportunities, management reevaluates its mission and objectives. Are they realistic? Do they need modification? If changes are Continue reading
Bowman’s Strategy Clock – A Competitive Strategy Analysis Tool
In many open markets, most goods and services can be purchased from any number of companies, and customers have a tremendous amount of choice. It’s the job of companies in the market to find their competitive edge and meet customers needs better than the next company. So, how, given the high degree of competitiveness among companies in a marketplace, does one company gain competitive advantage over the others? When there are only a finite number of unique products and services out there, how do different organizations sell basically the same things at different prices and with different degrees of success? This is a classic question that has been asked for generations of business professionals. In 1980, Michael Porter published his seminal book, “Competitive Strategy: Techniques for Analyzing Industries and Competitors”, where he reduced competition down to three classic strategies: Cost leadership, Product differentiation and Market segmentation. These three generic strategies Continue reading
What are Dynamic Capabilities?
Concept of Dynamic Capabilities of a Firm A dynamic capability refers to company’s ability to integrate, build and transform internal and external competencies. They can help an organization to achieve innovative forms of competitive advantage through integration, building and transformation of internal and external competencies, as to respond to changes in the environment. This management theory was defined by David Teece, Gary Pisano, and Amy Shuen in their 1997 paper Dynamic Capabilities and Strategic Management. In the context of achieving organizational change, aligned to the external pressure: namely, these capabilities are perceived as business processes that use resources — specifically the processes of integration, restructuring, acquisition and release resources — to adapt or create market changes. Dynamic capabilities are especially helpful in explaining the sources of competitive advantage in extremely volatile markets. Dynamic capabilities are determined by organizational and managerial processes, positions and paths. The organizational and managerial processes refer Continue reading