Model Shell/DPM

In contrast to the BCG and GE/McKinsey models already widespread at the time, the Shell/DPM model relied least of all on an assessment of the past achievements of the analyzed company and mainly focused on the analysis of the development of the current industry situation. The Shell/DPM matrix is ​​similar in appearance to the GE/McKinsey matrix, and is also a kind of development of the idea of ​​​​strategic business positioning, which is the basis of the BCG model. But compared to the one-factor BCG 2x2 matrix, the Shell/DPM matrix, like the GE/McKinsey matrix, is a two-factor 3x3 matrix based on multiple assessments of both qualitative and quantitative business parameters. Moreover, the multi-variable approach used to assess the strategic positions of a business in the GE/McKinsey and Shell/DPM models turned out to be more realistic in practice than the approach used by the BCG matrix.

In the Shell/DPM model, compared to the GE/McKinsey model, there is an even greater emphasis on the quantitative parameters of the business. If the criterion strategic choice in the BCG model was based on an assessment of cash flow, which is essentially an indicator of short-term planning, and in the GE / McKinsey model, on the contrary, on an assessment of the return on investment, which is an indicator of long-term planning, the Shell / DPM model suggests focusing on both of these indicators simultaneously .

The Shell/DPM model can consider types of businesses that are at different stages of their life cycle. Initially, when using the DPM model, Shell was more concerned about ensuring a rational cash flow. In the literature, one can find a description of the first use of the DPM model as a criterion for classifying types of business when deciding on the placement of financial, material and highly qualified labor resources. However, later it was noticed that individual cells of the 3x3 matrix of strategic positioning are oriented towards the “cash generation” strategy. Therefore, such a model is suitable both for analyzing business dynamics in terms of the prospects for return on initial investment, and for analyzing the financial balance sheet of the company's entire business portfolio in terms of cash flow.

The underlying idea of ​​the Shell/DPM model is the idea that the overall strategy of the firm should ensure that the balance between cash surplus and cash deficit is maintained through regular new promising businesses based on the latest scientific and technological developments that will absorb the surplus money supply generated by the types of businesses located in the maturity phase of their life cycle. The Shell/DPM model directs managers to redistribute certain cash flows from business areas that generate money in a business area with a high potential for return on investment in the future.

The DPM model represents a two-dimensional table, where the X and Y axes reflect the strengths of the enterprise (competitive position) and industry (product-market) attractiveness, respectively (Fig. ???). More precisely, the x-axis reflects the competitiveness of the company's business sector (or its ability to take advantage of the opportunities that exist in the corresponding business area). The y-axis is thus a general measure of the state and prospects of an industry.

Rice. 34. Shell/DPM Model Representation

Each of the 9 cells of the model corresponds to a specific strategy.

Position “ Business Leader". The industry is attractive and the company has a strong position in it, being a leader; the potential market is large, the market growth rate is high; Weaknesses of the enterprise, as well as obvious threats from competitors, are not noted.

Possible strategies: continue investing in the business while the industry continues to grow in order to protect its leading position; large capital investments will be required (more than can be provided by own assets); continue to invest, sacrificing momentary gains in the name of future profits.

Position "Growth strategy". The industry is moderately attractive, but the company has a strong position in it. Such an enterprise is one of the leaders, which is in the mature age of the life cycle of this business. The market is moderately growing or stable with a good rate of return and no other strong competitor present.

Possible strategies: try to keep their positions; position can provide the necessary financial resources for self-financing and also give additional money that can be invested in other promising areas of business.

Position "Cash Generator Strategies". The company occupies a fairly strong position in an unattractive industry. It is, if not the leader, then one of the leaders here. The market is stable but shrinking, and the rate of return in the industry is declining. There is also a certain threat from competitors, although the productivity of the enterprise is high and the costs are low.

Possible strategies: A business that falls into this box is the main source of income for the enterprise. Since no development of this business is required in the future, the strategy is to make small investments, extracting the maximum income.

Position “Strategy of amplification competitive advantage”. The company occupies a middle position in an attractive industry. Since the market share, product quality, and reputation of the enterprise are quite high (almost the same as that of the industry leader), the enterprise can become a leader if it allocates its resources appropriately. Before incurring any costs in this case, it is necessary to carefully analyze the dependence economic effect from investments in this industry.

Possible strategies: invest if the business area is worth it, while doing the necessary detailed investment analysis; to move into a leadership position, large investments will be required; a business area is considered highly suitable for investment if it can provide increased competitive advantage. The required investment will be greater than the expected return and therefore additional capital investment may be required to further compete for market share.

Position "Continue business with care." The company occupies an average position in the industry with an average attractiveness. The enterprise does not have any special strengths or opportunities for additional development; the market is growing slowly; the industry average rate of return is slowly declining.

Possible strategies: invest carefully and in small portions, being sure that the return will be quick and constantly conduct a thorough analysis of your economic situation.

Position “Strategies for Partial Curtailment”. The company occupies a middle position in an unattractive industry. The enterprise has no particular strengths and, in fact, no opportunities for development; the market is unattractive (low rate of return, potential surpluses production capacity, high capital density in the industry).

Possible strategies: since it is unlikely that, getting into this position, the company will continue to earn substantial income, insofar as the proposed strategy does not develop this species business, and try to turn physical assets and market position into the money supply, and then use their own resources to develop more promising businesses.

Position “Double production or shut down the business.” The company is in a weak position in an attractive industry.

Possible strategies: invest or leave this business. Since an attempt to improve the competitive position of such an enterprise by attacking on a broad front would require a very large and risky investment, insofar as it can only be undertaken after a detailed analysis. If it is established that the enterprise is able to compete for a leading position in the industry, then the strategic line is “doubling”. Otherwise, the strategic decision should be to leave the business.

Position “Continue business with caution or cut back on production.” The company occupies a weak position in a moderately attractive industry.

Possible strategies: no investment; all management should be focused on the balance of cash flow; try to stay in this position as long as it makes a profit; phase out the business.

Position "Business exit strategy". The company is in a weak position in an unattractive industry.

Possible strategies: since a company that falls into this box is generally losing money, every effort should be made to get rid of such a business, and the sooner the better.

In the DPM / Shell model, variables can be used to characterize the competitiveness of an enterprise and the attractiveness of an industry (Table ???).

Table 24

Specifications for DPM/Shell Model

Like many other classic models strategic analysis and planning model Shell/DPM is descriptive-instructive. This means that the manager can use the model both to describe the actual (or expected) position determined by the relevant variables, as well as to determine possible strategies. The strategies defined should, however, be considered with caution. The model is designed to help management decisions rather than replacing them.

The Shell/DPM model can also take time into account. Since each segment represents a specific point in time, a manager who wants to see changes after a certain period needs only to use the database for each period and compare the results. It should be noted that this model is especially effective for visualizing changes and developing strategic positions over time, since it is not tied to financial indicators, and therefore does not experience the influence of factors that can cause errors (for example, inflation).

The strategic decisions made on the basis of the Shell/DPM model depend on whether the manager's focus is on the life cycle of the type of business or the company's cash flow.

In the first case (see Fig. ???, direction 1), the following trajectory for the development of the company's position is considered optimal: from Doubling the volume of production or curtailing the business - to the Strategy for strengthening competitive advantages - to the Strategy of the Leader of the type of business - to the Growth strategy - to the Strategy of the generator cash - to the Strategy of partial curtailment - to the Strategy of curtailment (exit from business).

The stage of doubling the volume of production or curtailing the business. Selected new area business, which, of course, needs to be developed as part of the overall corporate strategy. The market is attractive, but since the business area is new to the enterprise, the company's competitive position in this business is still weak. Strategy - investment.

Stage of strengthening competitive advantages. With investment, the position of the company in the business area improves, which is the reason for the horizontal movement to the right edge of the matrix. The market continues to grow. The strategy is to keep investing.

Business type leader stage. With continued investment, the company's position in the business area continues to improve, which is the reason for further horizontal movement to the right. The market continues to grow and investment continues.

growth stage. The growth rate of the market is starting to slow down. This causes the beginning of the vertical movement of the company's position down. The profitability of the business area for the company is growing at the same level as the industry average.

Cash Generator Stage. The development of the market stops, causing further downward movement of the company's position. Strategy - investing only at the level necessary to maintain the positions achieved and ensure the profitability of the business.

Partial coagulation stage. The market starts shrinking, the profitability of the industry decreases and the company's position naturally also begins to weaken.

Further investment in this business can be completely stopped, and then a decision is made to curtail it altogether.

In the case of increased attention to cash flow (see Fig. ???, directions 2), the trajectory of the development of the company's positions from the lower right cells of the Shell/DPM matrix to the upper left ones is considered to be optimal. This means that the cash generated by the company during the Cash Generator and Partial Roll-off stages is used to invest in those business areas that correspond to the positions of Doubling Output and Strengthening Competitive Advantage.

Strategic balance involves the balance of the company's efforts in each of the areas of business, depending on the stage of the life cycle in which they are. Such balancing gives confidence that at the maturity stage of the business area there will always be a sufficient amount of financial resources in order to maintain the reproduction cycle of the enterprise by investing in new promising types of business. Financial balance means that income-generating businesses have sales that are sufficient to finance a growing business.

Most of the underlying theoretical assumptions in the Shell/DPM model are similar to those in the GE/McKinsey model. Here, too, business areas are assumed to be autonomous, unrelated to others either in terms of resources or results. Singling out the competitiveness of a company's business as the X-axis suggests that the market is an oligopoly. That is why for companies with a weak competitive position, the strategy of instantaneous or gradual curtailment of such a business is recommended. It is assumed that the existing gap in the competitive positions of companies by type of business will necessarily increase if a new source of competitive advantage is not found.

The model developed by the British-Dutch chemical company Shell was called Shell / DPM (Direct Policy Matrix) - a directed policy matrix (Fig. 5.3). The Shell / DPM matrix is ​​a two-factor 3x3 matrix, the purpose of which is to assess the quantitative and qualitative parameters of the business, that is, it is intended for multi-parameter strategic analysis. The axes of the matrix reflect the competitiveness of the business and industry (product - market) attractiveness. Let us dwell on the characteristics of nine acceptable strategic business positions.

The position "Leader of the type of business" is characterized by the high attractiveness of the industry and the competitiveness of the business. There is no obvious competitive pressure.

Position "Growth". In this position, the firm has a strong competitive position and the industry is moderately attractive. The firm may be one of the market leaders, characterized by moderate growth, in which there is no other strong competitor.

Position "Cash Generator". This role is usually played by a firm with a strong and well-established business, but operating in an unattractive industry. The company is one of the leaders in the industry, the market is stable, but it is declining, moderate threats from competitors are not dangerous for the company.

The position "strengthen competitive advantage" is characteristic of a medium-sized and efficient business firm operating in an attractive industry. The company's reputation is high, almost like an industry leader, which it can approach if it strengthens its competitive advantages.

The position "Continue business with caution" is typical for firms that occupy average business positions in an area with average attractiveness. The market is growing slowly, and the firm has no room for additional growth.

Position "Partially curtail business". The firm has no particular strengths and no development opportunities at all, as the market is not attractive.

The position "Double production or wind down the business" is typical for a firm operating in an attractive industry, but has a weak competitive position.

The position "Continue business with caution or partially curtail production" includes firms with weak competitive positions operating in a moderately attractive industry.

The "Cut business" position is typical for a firm that has a weak position in an unattractive industry.

The Shell/DPM model allows a firm to choose a specific strategy depending on the life cycle of a particular type of product or cash flow.

The model developed by Charles W. Hofer and Dan Shendel is called the Hofen / SchendeL model. The authors of this model considered that models such as BCG and GE / McKinsey were not suitable for analyzing new types of possible manufacturing and commercial activities in new markets, that is, to analyze emerging organizations.

The model is based on the assumption that there can be only two ways to optimize an organization's set of business types: buying a new (and/or strengthening an existing) type of business; sales (and / or weakening of an existing) type of business. The model proposes the following types of ideal business set for a firm: growth set; profit set; balanced set. In the structure of the model, along the ordinate axis, the stages of market development are reflected, and along the abscissa axis, the relative competitive position separate species business (Figure 5.4).

The application of this model allows you to determine the stages of evolution or the life cycle of the market. At the same time, the following variables are used as the studied parameters: market growth rates, product technological change rates, process technological change rates, changes in market growth, market segmentation and functional significance.

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Kemerovo State University

Department of Marketing

Essay

Model applicationShell/ DPMin strategic marketing

Performed by a student of group E - 063

Panafidin K. A.

Checked by Ph.D., Associate Professor

Kotikova G.P.

Kemerovo 2010

In 1975 the British-Dutch Chemical Shell company developed and introduced into the practice of strategic analysis and planning its own model, called the "directed policy matrix". Its appearance was directly related to the peculiarities of the dynamics of the economic environment in the conditions of the energy crisis that took place at that time: the overflow of the world market for crude oil, the steady fall in crude oil prices, low and constantly declining industry profit margins, high inflation. Traditional Methods financial forecasting turned out to be useless when it came to choosing a long-term investment strategy in such conditions. In contrast to the BCG and GE/McKinsey models already widespread at the time, the Shell/DPM model relied least of all on an assessment of the past achievements of the analyzed company and mainly focused on the analysis of the development of the current industry situation.

In such vertically integrated corporate structures, which include the structure of Shell, as well as the structures of most other oil companies, decisions are required both on the financing of individual refineries and other business units, and on the allocation of available volumes of crude oil. This condition makes it difficult direct use models of strategic analysis and planning of the BCG matrix type. Another complication is that the entire business in such corporations is built around one technological line, on which separate business units share the same production equipment among themselves. The whole set of products targeted at different market segments is the output of the same refinery, and thus the corresponding volumes and production costs, as well as profits, turn out to be completely interdependent. In addition, it should be added that very often products coming out of one such plant simply compete with each other in the market.

The Shell/DPM matrix is ​​similar in appearance to the GE/McKinsey matrix, and is also a kind of development of the idea of ​​​​strategic business positioning, which is the basis of the BCG model. However, there are fundamental differences between them. But compared to the one-factor BCG 2x2 matrix, the Shell/DPM matrix, like the GE/McKinsey matrix, is a two-factor 3x3 matrix based on multiple assessments of both qualitative and quantitative business parameters. Moreover, the multivariable approach used to assess the strategic positions of businesses in the GE/McKinsey and Shell/DPM models turned out to be more realistic in practice than the approach used by the BCG matrix.

In the Shell/DPM model, compared to the GE/McKinsey model, there is an even greater emphasis on the quantitative parameters of the business. If the strategic choice criterion in the BCG model was based on the assessment of cash flow (Cash Flow), which is essentially an indicator of short-term planning, and in the GE / McKinsey model, on the contrary, on the assessment of return on investment (Return of Investments), which is an indicator of long-term planning, then the Shell / DPM model suggests that when making strategic decisions, focus simultaneously on these two indicators.

The next most notable feature of the Shell/DPM model is that it can consider businesses at different stages of their life cycle. Therefore, consideration of changes in the pattern of strategic positioning of types of business after some time becomes an integral part of Shell / DPM modeling.

But, despite the apparent advantages of the Shell / DPM model as a matrix of multi-parametric strategic analysis, its popularity turned out to be limited to a number of very capital-intensive industries, such as chemical, oil refining, and metallurgy.

Initially, when using the DPM model, Shell was more concerned about ensuring a rational cash flow. In the literature, one can find a description of the first use of the DPM model as a criterion for classifying types of business when deciding on the allocation of financial, material and highly skilled labor resources. However, later it was noticed that individual cells of the 3x3 matrix of strategic positioning are oriented towards the strategy of "generating cash". Therefore, such a model is suitable both for analyzing business dynamics in terms of the prospects for return on initial investment, and for analyzing the financial balance sheet of the company's entire business portfolio in terms of cash flow. The underlying idea of ​​the Shell/DPM model is the idea, borrowed from the BCG model, that the overall strategy of the firm should be to maintain a balance between cash surplus and cash deficit through regular new promising types of business based on the latest scientific and technological developments, which will absorb excess money supply generated by businesses that are in the maturity phase of their life cycle. The Shell/DPM model directs managers to redistribute certain cash flows from business areas that generate money in a business area with a high potential for return on investment in the future.

Like all other classic models strategic planning, the DPM model represents a two-dimensional table, where the X and Y axes represent, respectively, strengths enterprises (competitive position) and industry (product-market) attractiveness (Figure 1). More precisely, the x-axis reflects the competitiveness of the company's business sector (or its ability to take advantage of the opportunities that exist in the corresponding business area). The y-axis is thus a general measure of the state and prospects of an industry.

Figure 1.- Representation of the Shell/DPM model

The division of the Shell/DPM model into 9 cells (in the form of a 3x3 matrix) was not done by chance. Each of the 9 cells corresponds to a specific strategy.

Position "Business Leader"

The industry is attractive, and the company has a strong position in it, being a leader; the potential market is large, the market growth rate is high; Weaknesses of the enterprise, as well as obvious threats from competitors, are not noted.

Possible strategies: continue to invest in the business while the industry continues to grow in order to protect its leading position; large capital investments will be required (more than can be provided by own assets); continue to invest, sacrificing momentary gains in the name of future profits.

Position« Growth strategy»

The industry is moderately attractive, but the company has a strong position in it. Such an enterprise is one of the leaders, which is in the mature age of the life cycle of this business. The market is moderately growing or stable with good margins and no other strong competitor present.

Possible strategies: try to keep positions; the position may provide the necessary funds for self-financing and also provide additional money that can be invested in other promising areas of the business.

Position "strategistsIcash generator"

The company occupies a fairly strong position in an unattractive industry. It is, if not the leader, then one of the leaders here. The market is stable but shrinking, and the rate of return in the industry is declining. There is also a certain threat from competitors, although the productivity of the enterprise is high and the costs are low.

Possible strategies: A business that falls into this box is the main source of income for the enterprise. Since no development of this business is required in the future, the strategy is to make small investments, extracting the maximum income.

Position« Strategies for Strengthening Competitive Advantage»

The company occupies a middle position in an attractive industry. Since the market share, product quality, and reputation of the enterprise are quite high (almost the same as that of the industry leader), the enterprise can become a leader if it allocates its resources appropriately. Before incurring any costs in this case, it is necessary to carefully analyze the dependence of the economic effect on investments in this industry.

Possible strategies: invest if the business area is worth it, while doing the necessary detailed investment analysis; to move into a leadership position, large investments will be required; a business area is considered highly suitable for investment if it can provide increased competitive advantage. The required investment will be greater than the expected return and therefore additional capital investment may be required to further compete for market share.

Position« Continue business with care»

The company occupies an average position in the industry with an average attractiveness. The enterprise does not have any special strengths or opportunities for additional development; the market is growing slowly; the industry average rate of return is slowly declining.

Possible strategies: invest carefully and in small portions, being sure that the return will be quick, and constantly conduct a thorough analysis of your economic situation.

Position« WITHstrategy of partial curtailment"

The company occupies a middle position in an unattractive industry. The enterprise has no particular strengths and, in fact, no opportunities for development; the market is unattractive (low rate of return, potential excess capacity, high capital density in the industry).

Possible strategies: since it is unlikely that, getting into this position, the company will continue to earn significant income, so far as the proposed strategy is not to develop this type of business, but to try to turn physical assets and market position into money supply, and then use its own resources to develop more promising business.

Position "Double production or shut down business»

The company is in a weak position in an attractive industry.

Possible strategies: invest or leave the business. Since an attempt to improve the competitive position of such an enterprise by attacking on a broad front would require a very large and risky investment, insofar as it can only be undertaken after a detailed analysis. If it is established that the enterprise is able to compete for a leading position in the industry, then the strategic line is "doubling". Otherwise, the strategic decision should be to leave the business.

Position "Continue business with caution or cut production partially»

The company occupies a weak position in a moderately attractive industry.

Possible strategies: no investment; all management should be focused on the balance of cash flow; try to stay in this position as long as it makes a profit; phase out the business.

Position"Business exit strategy"

The company is in a weak position in an unattractive industry.

Possible Strategies: Since a company that falls into this box is generally losing money, every effort should be made to get rid of such a business, and the sooner the better.

The following variables can be used in the DPM/Shell model to characterize the competitiveness of an enterprise and the attractiveness of an industry:

1. Variables characterizing the competitiveness of the enterprise (axis X):

Relative market share;

Coverage of the distribution network;

The effectiveness of the distribution network;

technological skills;

Width and depth of the product line;

Equipment and location;

Production efficiency;

Experience Curve;

Productive reserves;

Product quality;

Research potential;

Economies of scale in production;

After-sales service.

2. Variables characterizing the attractiveness of the industry (Y-axis):

Industry growth rates;

Relative industry rate of return;

Buyer price;

Buyer's loyalty to the brand;

The importance of competitive preemption;

Relative stability of the sectoral rate of return;

Technological barriers to entry into the industry;

The importance of contractual discipline in the industry;

Influence of suppliers in the industry;

The influence of the state in the industry;

The level of use of industry capacities;

Product replacement;

The image of the industry in society.

Like many other classical models of strategic analysis and planning, the Shell/DPM model is descriptive and instructive. This means that the manager can use the model both to describe the actual (or expected) position determined by the relevant variables, as well as to determine possible strategies. The strategies defined should, however, be considered with caution. The model is designed to help make managerial decisions, not replace them.

The Shell/DPM model can also take time into account. Since each segment represents a specific point in time, a manager who wants to see changes after a certain period needs only to use the database for each period and compare the results. It should be noted that this model is especially effective for visualizing changes and developing strategic positions over time, since it is not tied to financial indicators, and therefore is not influenced by factors that can cause errors (for example, inflation).

The strategic decisions made on the basis of the Shell/DPM model depend on whether the manager's focus is on the life cycle of the type of business or the company's cash flow.

In the first case (Figure 1, direction 1), the following trajectory for the development of the company's position is considered optimal: from Doubling the volume of production or curtailing the business - to the Strategy for strengthening competitive advantages - to the Strategy of the Leader of the type of business - to the Growth strategy - to the Cash generator strategy - to the Strategy partial curtailment - to the Strategy of curtailment (exit from business).

Let's bring brief description stages of this movement.

The stage of doubling the volume of production or curtailing the business

A new area of ​​business is selected, which, of course, needs to be developed as part of the overall corporate strategy. The market is attractive, but since the business area is new to the enterprise, the company's competitive position in this business is still weak. Strategy - investment.

Stage of strengthening competitive advantages

With investment, the position of the company in the business area improves, which is the reason for the horizontal movement to the right edge of the matrix. The market continues to grow. The strategy is to keep investing.

Business type leader stage

With continued investment, the company's position in the business area continues to improve, which is the reason for further horizontal movement to the right. The market continues to grow and investment continues.

growth stage

The growth rate of the market is starting to slow down. This causes the beginning of the vertical movement of the company's position down. The profitability of the business area for the company is growing at the same level as the industry average.

Cash Generator Stage

The development of the market stops, causing further downward movement of the company's position. Strategy - investing only at the level necessary to maintain the positions achieved and ensure the profitability of the business.

Partial coagulation stage

The market starts shrinking, the profitability of the industry decreases and the company's position naturally also begins to weaken.

Further investment in this business can be completely stopped, and then a decision is made to curtail it altogether.

In the case of increased attention to cash flow (Figure 1, directions 2), the optimal trajectory of the development of the company's positions from the lower right cells of the Shell/DPM matrix to the upper left ones is considered. This means that the cash generated by the company during the Cash Generator and Partial Roll-off stages is used to invest in those business areas that correspond to the positions of Doubling Output and Strengthening Competitive Advantage.

Strategic balance involves, first of all, the balance of the company's efforts in each of the areas of business, depending on the stage of the life cycle in which they are. Such balancing gives confidence that at the maturity stage of the business area there will always be a sufficient amount of financial resources in order to maintain the reproduction cycle of the enterprise by investing in new promising types of business. Financial balance means that income-generating businesses have sales that are sufficient to finance a growing business.

Most of the underlying theoretical assumptions in the Shell/DPM model are similar to those in the GE/McKinsey model. Here, as in the GE/McKinsey model, business areas are assumed to be autonomous, unrelated to others either in terms of resources or results. Singling out the competitiveness of a company's business as the X-axis suggests that the market is an oligopoly. That is why for companies with a weak competitive position, the strategy of instantaneous or gradual curtailment of such a business is recommended. It is assumed that the existing gap in the competitive positions of companies by type of business will necessarily increase if a new source of competitive advantage is not found.

The Y-axis (attractiveness of the business sector) implies the existence of a long-term development potential for all participants in this business, and not just for the company in question.

In practice, there are two main mistakes when using the Shell/DPM model, which are essentially the same as for the GE/McKinsey model. First, managers often take the strategies recommended by this model very literally. Secondly, it is also common to attempt to evaluate as many factors as possible, with the implication that this will lead to a more objective picture. In fact, the opposite effect is obtained and enterprises whose positions are evaluated in this way, as a rule, always end up in the center of the matrix.

One of the main advantages of the Shell/DPM model is that it solves the problems of combining qualitative and quantitative variables into a single parametric system. Unlike the BCG matrix, it does not depend directly on the statistical relationship between market share and business profitability.

As a criticism, the following can be said:

The choice of variables for analysis is very conditional;

· there is no criterion by which it would be possible to determine how many variables are required for analysis;

It is difficult to assess which of the variables are most significant;

assignment specific gravity variables when constructing matrix scales is very difficult;

· It is difficult to compare business areas across industries, as the variables are highly industry-specific.

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The Shell / DPM (Direct Policy Matrix) model was proposed in 1975 in the context of the energy crisis that was taking place at that time. The Shell/DPM Matrix is ​​similar to the GE/McKinsey Matrix and is an extension of the business positioning idea behind BCG. What distinguishes Shell/DPM is the assumption that the market is an oligopoly. Therefore, for organizations with weak competitive positions, an immediate or gradual exit strategy is recommended. Also, the attractiveness of the industry implies the existence of a long-term development potential for all market participants, and not just for the company in question.

The model is a two-dimensional table (Figure 12.10). Strategic decisions depend on what is the focus of management: the life cycle of a type of business or the company's cash flow.

Figure 12.10. Shell/DPM Matrix Strategic Decisions

In the first case (direction 1, Fig. 12.10), the company's development trajectory is considered optimal: from the position of "doubling the volume or curtailing the business" to the position of "curtailing the business". In the case of increased attention to cash flow (direction 2, Fig. 12.10), the trajectory of the development of positions from the lower right cells to the upper left cells is considered optimal. Thus, the Shell/DPM matrix allows solving the problems of combining qualitative and quantitative variables in single system and unlike the BCG matrix does not depend directly on the statistical relationship between market share and business profitability. In the Shell/DPM model, compared to the GE/McKinsey model, there is an even greater emphasis on the quantitative parameters of the business. Also, the matrix can consider types of businesses that are at different stages of their life cycle.

As comments, we can point out that the popularity of this matrix turned out to be limited by a number of capital-intensive industries (chemical, oil refining, metallurgical). Moreover, because the variables are industry-specific, it is difficult to compare SBAs across industries.

The Shell/DPM model was created as a development of the Boston Advisory Group (BCG) model. The Directed Policy Matrix has a superficial resemblance to matrix "General Electric - McKinsey", but at the same time, it is a kind of development of the idea of ​​strategic business positioning, embedded in the BCG model. The Shell/DPM matrix is ​​a 3x3 two-factor matrix. It is based on assessments of both quantitative and qualitative business parameters.

The following indicators are located along the axes of the Shell/DPM matrix:

• business industry perspectives;
• business competitiveness.

The Shell/DPM model puts more emphasis on quantification than the GE-McKinsey model. The Shell/DPM model evaluates both cash flow (BCG matrix) and return on investment (GE-McKinsey matrix). As in the GE-McKinsey model, businesses that are at different stages of their life cycle can be valued here.
The X-axis in the directed policy matrix reflects the strengths of the enterprise (competitive position), and the Y-axis reflects industry attractiveness. The y-axis is a general measure of the state and prospects of an industry.

rice. 1. Shell Directed Policy Matrix.

Each of the nine cells of the matrix corresponds to a specific strategy:

• Business leader - the company has a strong position in an attractive industry. The development strategy of the enterprise should be aimed at protecting its leading positions and further development business.
• Growth strategy - the company has a strong position in a moderately attractive industry. The company needs to try to maintain its position.
• Cash Generator Strategy - The company is in a strong position in an unattractive industry. The main task of the enterprise is to extract the maximum income.
• Competitive advantage strategy - the company occupies a middle position in an attractive industry. It is necessary to invest in order to move into a leadership position.
• Continuing business with caution - the company is in the middle position in the industry with an average attractiveness. Careful investment with a quick return.
• Partial exit strategy - the company is in the middle position in an unattractive industry. You should extract the maximum income from what is left, and then invest in promising industries.
• Double production or wind down the business - the company is in a weak position in an attractive industry. The company must either invest or leave the business.
• Continue business with caution or partially curtail production - the company occupies a weak position in a moderately attractive industry. Try to stay in the industry while it makes a profit.
• Exit strategy - the company is in a weak position in an unattractive industry. The company needs to get rid of such business.

Essentially, the Shell Matrix suggests keeping the focus on cash flow and evaluating return on investment. The main idea of ​​the matrix is ​​that the overall strategy of the organization should maintain a balance between a cash surplus and its deficit by regularly developing new promising types of business based on the latest scientific and technological developments that will absorb the excess money supply generated by the types of business that are in maturity phase of its life cycle. The Shell Matrix focuses on the redistribution of certain financial flows from business areas that generate money supply to business areas with a high potential for return on investment in the future.
Shell has also added a number of recommendations to its matrix and provides an additional decision table (Table 1).

Table 1. Decision table depending on the prospects for profit and return on investment

As with the BCG and GE-McKinsey matrices, the matrix in the literature identifies company competitiveness and industry attractiveness variables, which are used in the construction of the Shell/DPM matrix and the behavior of portfolio analysis (Table 2).

Table 2. Variables of company competitiveness and industry attractiveness.