The following steps are based on McDonalds work.
Step 1. List the population of products or services for markets that you intend to include in the matrix. – This can be countries, companies, subsidiaries, regions, products, markets, segments, customers, distributors or any other unit of analysis that is important. This is McDonald’s product-for-market concept.
Step 2. Define the market attractiveness factors – The purpose for the vertical axis is to discriminate between more and less attractive markets. Factors can be summarised into three headings
Growth rate
Accessible market size – an attractive market is not only large but is also accessible
Profit potential – this varies considerable from industry to industry (Porter’s Five Forces can be used to estimate the profit potential of a segment)
Step 3. Weight and score the market attractiveness for the relevant products or services for markets (weighting out of 100 and score out of 10 for example)
Step 4. Define business strengths. – These factors are usually a combination of the organisations strengths in relation to the competitors’ strengths in connection with the customer-facing needs or those things that the customer requires. These can be grouped into the following factors as an example and each factor can be made up of numerous sub-factors:
Product requirements
Price requirements
Service requirements
Promotion requirements
Step 5. Weight and score the business strengths. – Weights of the factors should equal 100. Score the factor out of 10 and multiply the score by the weighting. Divide this score by 100 and add it to the other factor scores to obtain an overall score for the unit being analysed. Divide each score into the score of the biggest competitor to obtain a relative score. The biggest competitors position is taken as 1 and the other units are plotted accordingly.
|
CSF |
Weight |
Us |
|
Comp1 |
|
Comp2 |
|
|
Product |
30 |
9 |
207=2.7 |
6 |
180=1.8 |
4 |
120=1.2 |
|
Price |
35 |
6 |
210=2.1 |
5 |
175=1.75 |
10 |
350=3.5 |
|
Service |
25 |
7 |
175=1.75 |
9 |
225=2.25 |
5 |
125=1.25 |
|
Image |
10 |
4 |
40=0.4 |
8 |
80=0.8 |
3 |
30=0.3 |
|
Total |
100 |
|
4.25 |
|
6.6 |
|
6.25 |
The x-axis coordinates are therefore
Us = 4.25/6.6= 0.64
Comp1=6.6/6.6= 1.0 (This is the biggest competitor)
Comp2= 6.25/6.6 = 0.9
Step 6 Producing the directional policy matrix - These x-co-ordinates along with their corresponding market attractiveness co-ordinates must now be positioned on the matrix. The market size is used to determine the size of the circle and the organisations share of this market is depicted as a wedge in the circle.
1 is more often than not the mid point on the x-axis and in this example Competitor 1 would lie on this mid point with Us and Competitor 2 to the right of it.
The McDonald DPM
McDonald used the same quadrant names as those of the Boston Consulting Group matrix but has stessed that actual reference using these labels to products or business should be avoided.
Step 7 – Forecasting (an optional step). The factors are rescored for the products /services in three years time. (This can be any time frame that fits in with the organisations forecast period). The circles are plotted on the same matrix as the original demonstrates the movement that will have to take place to achieve forecast.
Step 8. Set strategies – Strategies are set to achieve the desired positions on the matrix.