Hofers Model

THE HOFER LIFE-CYCLE MARKET EVOLUTION MATRIX
TWO DIMENSIONS Co) EARLY DEVELOPMENT RAPID GROWTH / TAKE-OFF SHAKE-OUT MATURITY / SATURATION DECLINE / STAGNATION (Charles Hofer & A. D. Little,
Stage of Industry / Market Evolution
Business Strength / (Competitive Position)

SAME DIMENSIONS AS USED IN THE GE BUSINESS SCREEN ADVANTAGES
Can be used to identify and track developing winners Illustrates how the firms businesses are distributed across the stages of industry evolution
Hoffer's life cycle matrix: Hoffer developed 15 cell matrix. Businesses are plotted in terms of industrys stage in evolutionary life cycle and business units competitive position. Industrys stage in evolutionary life cycle consists following stages Development, Growth, Shakeout, Maturity, Decline Business units competitive position consists following positions- Strong, Average and Weak
Business unit A would to be a developing winner. Its relatively large share of the market combined with its being at the development stage of product- market evolution and its potential for being in a strong competitive position make it a good candidate for receiving more corporate resources. Business unit B is somewhat similar to A . However, it has a relatively small share of the market given its strong competitive position. A strategy would have to be developed to overcome this low market share in order to justify more investments. Business unit C might be classified as a potential loser. A strategy must be developed to overcome the low market share and weak competitive position in order to justify future investments.
Business unit D is in a shakeout period, has a relatively large share of the market, and is in a relatively strong position. Investment should be made to maintain current market position. On the long run, it will become a Cash Cow Business units E and F are cash cows and should be used for cash generation. Business unit G appears to be a dog. It should be managed to generate cash in the short run, if possible; however, the long-run strategy will more the likely be divestment or liquidation
THE HOFER LIFE-CYCLE MARKET EVOLUTION MATRIX

BUSINESS STRENGTH / COMPETITIVE POSITION
STRONG ---EARLY DEVELOPMENT ----------------------------AVERAGE WEAK
--------------------------
STAGE OF INDUSTRY / MARKET

----
RAPID GROWTH / TAKE-OFF -------------------------SHAKE-OUT
EVOLUTION
---MATURITY / SATURATION ---DECLINE / STAGNATION ----------------------------------------------------------------------------
The Shell Directional Policy Matrix
is another refinement upon the Boston
Matrix. Along the horizontal axis are prospects for sector profitability, and along the vertical axis is a company's competitive capability. 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.
Shell directional policy matrix (Portfolio analysis) only enter those segments where the company has the opportunity to succeed. Its a
sort of extension to the BCG matrix and is a very useful tool for efficient policy making issues.
Shell directional policy matrix: a tool for analysing a product portfolio, plotting competitive capability against prospects for sector profitability for each product, resulting in a nine-cell matrix.
The Royal Dutch Shell Group developed the directional policy matrix as a portfolio planning tool. It is a three by three matrix. It is used to identify business sector prospects and companys competitive capabilities. Horizontal axis represents business sector profitability . It assess on the criteria of a) Market growth rate b) Market quality c) Industry situation d) Environmental considerations Vertical axis represents companys competitive capability. It asses on the criteria of a) Market position b) Product research and development c) Production capability Shell Directional Policy Matrix
Divest: SBUs 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. Phased withdrawal : SBUs 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. Double or quit : Gamble on potential major SBUs for the future. Either invests more to use the prospects presented by the market or else better to quit the business.
Custodial : SBUs 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 SBUs or get out of the scene so as to focus more on other attractive business. Try harder : SBUs 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. Cash Generator : Even more like a cash cow, milk here for expansion elsewhere. SBUs May continue their operations, at least for generating strong cash flows and satisfactory profits. No further investments are made. Growth : Grow the market by focusing just enough resources here. These SBUs need funds to support product innovations, R&D activities etc. Shell Directional Policy Matrix
Leader - major resources are focused upon the SBU. Try harder - could be vulnerable over a longer period of time, but fine for now. Double or quit - gamble on potential major SBU's for the future. Growth - grow the market by focusing just enough resources here. Custodial - just like a cash cow, milk it and do not commit any more resources. Cash Generator - Even more like a cash cow, milk here for expansion elsewhere. Phased withdrawal - move cash to SBU's with greater potential. Divest - liquidate or move these assets on a fast as you can.

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THE HOFER LIFE-CYCLE MARKET EVOLUTION MATRIX

Stage of Industry / Market Evolution

Business Strength / (Competitive Position)

THE HOFER LIFE-CYCLE MARKET EVOLUTION MATRIX

STAGE OF INDUSTRY / MARKET

RAPID GROWTH / TAKE-OFF -------------------------SHAKE-OUT

The Shell Directional Policy Matrix

is another refinement upon the Boston

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