Directional Policy Matrix

Satisfactory Essays
Directional Policy Matrix
1. Introduction
Many large companies comprise several distinct divisions or strategic business units (SBUs). So one of the challenges facing the parent company of a multi-divisional company is to allocate resources to each division.
So in order to make wise decisions on resource allocation, is there a tool that can assist senior executives determine the direction for each division or SBU?
Actually there are two tools, the BCG matrix and the Directional Policy Matrix (DPM). We have already looked at the BCG matrix and its focus upon the company's relative market share and market growth. As we will see below, the DPM also helps companies determine the future commitment levels to particular divisions.
2. The Directional Policy Matrix
This tool employs two variables:
The Business Position (i.e. measures the competitive position and market performance of the company)
The Business Sector Prospects (i.e. is the sector in a growing or declining sector)

McDermott on The Directional Policy Matrix provides a pithy overview of the DPM and includes multiple examples. You should consult this as this will show readily that this is a simple, yet very useful tool to inform company strategic planning.
3. Using the BCG Matrix vs Directional Policy Matrix
The Directional Policy Matrix is a tool that was developed to provide a different perspective from the BCG matrix. The Table below summarizes the measures used in each tool. Table: Measures Used in BCG Matrix vs Directional Policy Matrrix

The BCG Matrix The Directional Policy Matrix
Measures Used
Relative Market Share
Competitive Position
Measures Used
Market Growth Rate
Business Position
The measures employed result in very different conclusions.
What does the BCG Matrix Tell Apple?
It tells Apple the following:
Tablets: this is a "Star" as Apple enjoys very high relative market share and the market is growing strongly;
IPhone: this is a "Question Mark" as Apple has a low

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