Application: Business Portfolio Strategy, Investment, Budgeting

The Concept

Sometimes called the “GE/McKinsey matrix”, the directional policy matrix is a way of categorizing and prioritizing opportunities (see Figure D.3). It can be customized to unique content and made relevant to the individual strategic position of the company in its market place. The grid plots “market attractiveness” against “business strength” and allows management to prioritize resources accordingly. It is created in the following way:

(i) Identify and define the strategic business units in a company.

(ii) Debate and agree the factors contributing to market attractiveness in the markets under discussion.

(iii) Agree the factors contributing to business success.

(iv) Rank and rate the market attractiveness and business strength features.

(v) Rank each business or product unit against these criteria.

(vi) Plot the SBUs on the matrix.

(vii) Represent the total size of the market and the business’s market share by a pie chart at the appropriate plot on the matrix.

Figure D.3: The directional policy matrix


Steps (iv) and (v) involve numerically rating the relative importance of each feature. Multiplying these together and totalling them for each business unit gives a composite ...

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