The matrix was developed as a result of the findings and research done during the previous ten years that suggested that the magnitude and type of opportunities and threats that face a business vary according to the stage of evolution of that industry as well as its competitive position within that industry. The model concentrates on positioning existing SBU’s on the product-market evolution matrix thereby establishing an ideal future portfolio.
Hofer-Schendel suggested that a strategy analysis is made up of four steps
1. The assessment of the current strategic position of the business
2. The identification of the major strategic opportunities and threats that the business will face given its current strategic position
3. Identification of the principle resources and skills on which the business can build a competitive strategy
4. Identification of major issues and gaps deriving from the current position and the threats and opportunities identified in the future.
The matrix was developed to solve the first step in this approach.