12A Strategic Product Management - Shell's Directional Policy Matrix

Strategic Product Management - Shell's Directional Policy Matrix

1. Strategic
Product
Management
Shell’s Directional Policy Matrix
/PGDM/KIAMS/2021
A publication of
Dr. Rajesh K Satpathy

2. Shell’s Directional Policy Matrix
Shell Directional Policy Matrix (Portfolio Analysis) only enter those segments
where the company has the opportunity to succeed.

3. StrategicEmphasis…
Thetraditionalwayof
lookingatthebusiness
units’strengthsand
weaknessesaswellas
comparing business
sectorprospectswasto
usehistoricaland
forecastratesofreturn
oncapitalemployed.
Shell’s Directional Policy Matrix
Thiswasdonebecauseasectorwhere
prospectswerefavorableandthe
company’spositionstrongtendedto
showhigherprofitability.
Shellfoundthattheserecordsand
forecastswerenotsufficientforthe
guidanceofmanagementinthe
corporateplanningandallocationof
resources.

4. Reasons…
1. Records and forecasts do not provide a systematic explanation why one business sector
has more favorable prospects than another or why the company’s position in a particular
sector is strong or weak.
2. Records and forecasts do not provide enough insight into the underlying dynamics and
balance of the individual business sectors or the balance between the sectors.
3. Using the forecast and record method, when new products are being considered, actual
experience cannot be consulted.
4. Worldwide inflation has severely weakened validity and credibility of financial forecasts
especially in the case of businesses that are affected by oil process.
Shell’s Directional Policy Matrix

5. TheShellDirectional
PolicyMatrix(SDPM)is
anotherrefinementupon
theBostonConsulting
Group(BCG)Matrix.
Alongthehorizontalaxis
areprospectsforbusiness
sectorprofitability,and
alongtheverticalaxisisa
company’s competitive
capability.
Shell’s Directional Policy Matrix
Businesssectorprofitabilityincludes
thesizeofthemarket,expected
growth,lackofcompetition,profit
marginswithinthemarketandother
favorablepoliticalandsocio-economic
conditions.
Ontheotherhandcompany’s
competitivecapabilityisdetermined
bythesalesvolume,theproducts
reputation,reliabilityofserviceand
competitivepricing.

6. Shell’s Directional Policy Matrix

7. EachofthezonesinShell’sDirectionalPolicyMatrixis
described…
1.Divest:SBU’srunninginlosseswithuncertaincashflows.They
shouldbedivestedasthesituationisnotlikelytoimproveinthenear
future.Theseliquidateormovetheeassets.
2.Phasedwithdrawal:SBU’swithweakcompetitivepositioninalow
growthmarketwithverylittlechanceofgeneratingcashflows.They
shouldbephasedoutgradually.Thecashrealizedshouldbeinvested
inmoreprofitableventures.
Shell’s Directional Policy Matrix

8. 3.DoubleorQuit:GambleonpotentialmajorSBU’sforthefuture.
Eitherinvestsmoretousetheprospectspresentedbythemarketor
elsebettertoquitthebusiness.
4.Custodial:SBU’sarejustlikeacashcow,milkitanddonotcommit
anymoreresources.Thecorporatehastobearwiththesituationby
gettinghelpfromotherSBU’sorgetoutofthescenesoastofocus
moreonotherattractivebusiness.
5.Growth:Growthemarketbyfocusingjustenoughresourceshere.
TheseSBU’sneedfundstosupportproductinnovations,R&Dactivities
etc.
Shell’s Directional Policy Matrix

9. 6.MarketLeadership:MajorresourcesarefocusedupontheSBU.It
mustreceivetoppriority.
7.Tryharder:SBU’scouldbevulnerableoveralongerperiodoftime,
butfinefornow.Theyneedadditionalresourcestostrengththeir
capabilities.Thecorporatetryhardertoexploitthebusinessprospects
thoroughly.
8.CashGenerator:Evenmorelikeacashcow,milkhereforexpansion
elsewhere.SBU’smaycontinuetheiroperations,atleastforgenerating
strongcashflowsandsatisfactoryprofits.Nofurtherinvestmentsare
made.
Shell’s Directional Policy Matrix

10. 6.MarketLeadership:MajorresourcesarefocusedupontheSBU.It
mustreceivetoppriority.
7.Tryharder:SBU’scouldbevulnerableoveralongerperiodoftime,
butfinefornow.Theyneedadditionalresourcestostrengththeir
capabilities.Thecorporatetryhardertoexploitthebusinessprospects
thoroughly.
8.CashGenerator:Evenmorelikeacashcow,milkhereforexpansion
elsewhere.SBU’smaycontinuetheiroperations,atleastforgenerating
strongcashflowsandsatisfactoryprofits.Nofurtherinvestmentsare
made.
Shell’s Directional Policy Matrix

11. Thank You!!