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Shell Direction Policy Matrix

The Shell Directional Policy Matrix (DPM) is an adaptation of the Boston Consulting Group Matrix that evaluates business units along two axes: prospects for business sector profitability and a company's competitive capability. Business sector profitability considers market size, growth, competition, margins, and political/economic conditions. Competitive capability assesses sales, product reputation, service reliability, and pricing. The DPM suggests different strategic options depending on where a business unit falls, though the zones are irregular and blend together. Strategic options range from divesting low growth/weak competitive units to focusing major resources on market leadership units.

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249 views

Shell Direction Policy Matrix

The Shell Directional Policy Matrix (DPM) is an adaptation of the Boston Consulting Group Matrix that evaluates business units along two axes: prospects for business sector profitability and a company's competitive capability. Business sector profitability considers market size, growth, competition, margins, and political/economic conditions. Competitive capability assesses sales, product reputation, service reliability, and pricing. The DPM suggests different strategic options depending on where a business unit falls, though the zones are irregular and blend together. Strategic options range from divesting low growth/weak competitive units to focusing major resources on market leadership units.

Uploaded by

habtamu yilma
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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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. However decisions often span options and in practice the zones are
an irregular shape and do not tend to be accommodated by box shapes. Instead they blend into each
other.

1. Divest: SBU’s running in losses with uncertain cash flows. They should be divested as
the situation is not likely to improve in the near future. These liquidate or move the
assets.
2. Phased withdrawal: SBU’s with weak competitive position in a low growth market with
very little chance of generating cash flows. They should be phased out gradually. The
cash realized should be invested in more profitable ventures.
3. Double or quit: Gamble on potential major SBU’s for the future. Either invests more to
use the prospects presented by the market or else better to quit the business.

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4. Custodial: SBU’s are just like a cash cow, milk it and do not commit any more
resources. The corporate has to bear with the situation by getting help from other SBU’s
or get out of the scene so as to focus more on other attractive business.
5. Try harder: SBU’s could be vulnerable over a longer period of time, but fine for now.
They need additional resources to strength their capabilities. The corporate try harder to
exploit the business prospects thoroughly.
6. Cash Generator: Even more like a cash cow, milk here for expansion elsewhere. SBU’s
may continue their operations, at least for generating strong cash flows and satisfactory
profits. No further investments are made.
7. Growth: Grow the market by focusing just enough resources here. These SBU’s need
funds to support product innovations, R&D activities etc.
8. Market Leadership: Major resources are focused upon the SBU. It must receive top
priority

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