Building the Matrix

Each of the organization’s strategic business units (SBUs) is plotted on a matrix of two dimensions: industry attractiveness and business strength. Each of these two dimensions is actually a composite of a variety of factors.

Industry attractiveness might be determined by such factors as the rate of industry growth, the number of competitors in an industry, and the weakness of competitors within an industry.

Business strengths might be determined by such factors as a company’s core competencies and capabilities, financially solid position, its good bargaining position over suppliers, and its high level of technology use.

Sustainable Competitive Advantage

Defining the Position of Business Units

Managers can place pie charts representing a company line of business or SBU on the matrix. Circle size would indicate the relative market size for each line of business.

A shaded portion of a circle would represent the portion of the total SBU market that a company has captured.

Making Investment Decisions

Specific strategies for a company are implied by where their businesses (represented by pie charts) fall on the matrix. Businesses falling in the cells that form a diagonal from higher left to lower right are medium-strength businesses that should be invested in only selectively. Businesses above and to the right of this diagonal are the strongest and the ones that the company should invest in and help to grow. Businesses in the cells below and to the left of the diagonal are low in overall strength and are serious candidates for divesture.