The Arthur D. Little provides with the ADL matrix that is a portfolio management method based on thought of product life cycle. The ADL portfolio management involves the dimensions of environmental assessment and business strength assessment. The environmental assessment approaches to industry maturity whereas business strength assessment leads to competitive position. In determining both assessments, the matrix helps out the firms in analyzing their business role in the market place (Porter, 2008).
In ADL portfolio management, industry maturity is very close to the product life cycle or it could be renamed as industry life cycle, though with the industry segments are also considered. Industry maturity is classified in four following divisions;
Embryonic: It involves the introduction stage by following rapid market growth, less competition, high prices and investments and new technological aspects.
Growth: In this stage, market is strengthening as the sales increases, existence of few competitors is analyzed and company achieves excellence in bringing up a new product.
Mature: At maturity stage the market is completely stable with well established base of customers and market shares are also stable. With a lot of competitors, the company is making efforts in differentiating their product from competitors.
Aging: The last stage of the market in which demand starts to decline and attaining market shares from the competitors is becoming a difficult task, then company requires innovating or modifying the product.
The assessments of the industry life cycle are based on the facts like business market share, investment, profitability and cash flow.
Dominant: It is an ordinary position which is somehow associated with monopoly of position or customers lock-in.
Strong: At this point, companies attain a lot of freedom as because position of company is comparably powerful.
Favorable: In a market place, company has an edge on the segments of competitive strengths. Strength of the product and geographical advantages are taken into consideration at this stage.
Tenable: At this stage, companies faces hindrances from their strong competitors those who have a competitive strength. Difficulties are faced because they do not have a sustainable competitive edge.
Weak: Companies at this position are unattractive and undesirable situation, though they have opportunities in order to enhance their potion in the market and becoming favorable.
How to use ADL Matrix?
Following are the steps that are involved in using the ADL Matrix (Herman, 2006);
• Identify the industry maturity category
• Determining competitive position
• Plot the position of the matrix
Limitations of ADL Matrix
• No standard length of the life cycle is required
• It is considered out of the depth while determining the industry life cycle
• The length of the life cycle might be influence by the competitors of the firm.
• Porter, M.K (2008), The Five Competitive Forces That Shape Strategy. Harvard business review.
• Accessed on May 20, 2013 http://www.valuebasedmanagement.net/methods_adl_matrix.html
• Herman, P (2006). Managing other people’s business, but not our own