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    Figure 26.1 The Directional Policy Matrix (DPM)

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    Abdela Tule
    The Directional Policy Matrix (DPM) is a framework that classifies and categorizes an organization's business activities based on its strengths/capabilities and how attractive its markets are. The DPM is a 2x2 or 3x3 matrix that analyzes portfolio of products/operations based on their potential to achieve objectives and the organization's ability to seize opportunities. It was developed by McKinsey as an improved version of the Boston Matrix, able to consider more decision influences. The DPM analysis is typically done at the strategic business unit level.

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    Figure 26.1 The Directional Policy Matrix (DPM)

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    Abdela Tule
    53 views2 pages
    The Directional Policy Matrix (DPM) is a framework that classifies and categorizes an organization's business activities based on its strengths/capabilities and how attractive its markets are. The DPM is a 2x2 or 3x3 matrix that analyzes portfolio of products/operations based on their potential to achieve objectives and the organization's ability to seize opportunities. It was developed by McKinsey as an improved version of the Boston Matrix, able to consider more decision influences. The DPM analysis is typically done at the strategic business unit level.

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    The Directional Policy Matrix (DPM) is a framework that classifies and categorizes an organization's business activities based on its strengths/capabilities and how attractive its markets are. The DPM is a 2x2 or 3x3 matrix that analyzes portfolio of products/operations based on their potential to achieve objectives and the organization's ability to seize opportunities. It was developed by McKinsey as an improved version of the Boston Matrix, able to consider more decision influences. The DPM analysis is typically done at the strategic business unit level.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    53 views2 pages

    Figure 26.1 The Directional Policy Matrix (DPM)

    Uploaded by

    Abdela Tule
    The Directional Policy Matrix (DPM) is a framework that classifies and categorizes an organization's business activities based on its strengths/capabilities and how attractive its markets are. The DPM is a 2x2 or 3x3 matrix that analyzes portfolio of products/operations based on their potential to achieve objectives and the organization's ability to seize opportunities. It was developed by McKinsey as an improved version of the Boston Matrix, able to consider more decision influences. The DPM analysis is typically done at the strategic business unit level.

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    of 2

    CONCEPT 26

    THE DIRECTIONAL POLICY MATRIX

    The Directional Policy Matrix (DPM) is a framework which can be used to


    classify and categorise an organisation's business activities in terms of its
    strengths, capabilities or market position, and the way it perceives markets
    to be attractive. The basic structure of a DPM is illustrated in Figure 26.1.
    The purpose of the matrix is to diagnose an organisation's strategic options
    in relation to those two composite dimensions; business strengths and
    market attractiveness. The DPM, therefore, enables organisations to
    conduct an analysis of their portfolio of products or areas of operation.

    The analysis is performed, first, according to the potential each product


    area or business has to achieve the organisation's objectives and second,
    according to the organisation's ability to take advantage of the range of
    opportunities it faces. The matrix requires its users to identify a number of
    factors which will act as indicators of the attractiveness of a market or
    opportunity to them and, similarly, a number of factors which will act as
    indicators of organisational strengths. These factors will obviously vary

    Business/company strengths
    High Medium Low

    Figure 26.1 The Directional Policy Matrix (DPM)

    133

    M. Meldrum et al., Key Marketing Concepts


    © Mike Meldrum and Malcolm McDonald 1995
    134 Understanding Product Management

    from one product or business area to another since what will be attractive to
    one activity may not be attractive in another area of operation, or, at least,
    may not be equally attractive. Similarly, a strength or capability in one area
    may not exist or be a strength in another.

    Compared with other portfolio analysis tools, such as the Boston Matrix,
    the DPM is a more sophisticated mechanism. Like its forerunner, the Boston
    Matrix, it can be used to derive quantitative comparisons between areas of
    activities, but, in addition, is able to take into account a much wider range
    of decisional influences. In fact, the DPM was originally conceived by
    General Electric and developed by McKinsey (management consultants),
    and later Shell, as a means of overcoming some of the limitations the Boston
    Matrix was perceived to have. It is usually drawn as a 3 x 3 box matrix,
    rather than use the more standard 2 x 2 format, in order to encompass the
    range of strategic options it covers. In the end, the number of lines drawn is
    irrelevant. What is more important is defining the substance of the matrix
    and its axes, and adopting an orderly methodology for its application.

    • Strategic Business Unit

    Since the purpose of performing a DPM analysis is to provide a basis for


    determining policy and allocating resources for the alternative products or
    business within an organisation, it is important to consider the
    organisational level at which the analysis should be conducted. This is
    normally taken as being that of the 'strategic business unit' (SBU). The most
    common definition of a SBU is that it will:

    • Have common segments and competitors for most of its products.


    • Operate in external markets.
    • Be identifiable as a discrete and separate unit.
    • Be managed by people who will have control over most of the areas
    critical to success.

    Thus, the process of defining an SBU can be applied all the way down to
    product or departmental level. It is, therefore, possible to use the DPM for
    any unit that has within it a number of different variables that can be
    usefully plotted using a two-dimensional matrix. There must obviously be
    two or more markets or segments between which managers wish to choose,
    and these can be either existing or potential markets. It is usually felt that
    there should be at least three and a maximum of ten areas for analysis if
    using the DPM is to be of value.

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