The Arthur D. Little Model
This model is based on competitive position and stage of industry maturity. The competitive position is recognized in five main categories: (a) Dominant, (b) Strong, (c) Favourable, (d) Tenable, and (e) Weak. The second dimension of the model – the stage of industry maturity – ranges from embryonic to aging.
The combination of competitive position and industry maturity provides the basis for determining the SBU’s strategic conditions and subsequently, the identification and evaluation of the strategic options open to the company.
The ADL model is as follows:
| Embryonic | Growth | Mature | Aging | |
|---|---|---|---|---|
| Dominant | Grow fast Build barriers Act offensively | Grow fast Aim for cost leadership Defend position Act offensively | Defend position Increase the importance of cost Act offensively. | Defend position Focus Consider withdrawal. |
| Strong | Grow fast Differentiate | Lower cost Differentiate Attack small firms. | Lower costs Differentiate Focus. | Harvest |
| Favorable | Grow fast Differentiate | Focus Differentiate Defend. | Focus Differentiate Hit smaller firms. | Harvest |
| Tenable | Grow with the industry Focus. | Hold on or withdraw Niche aim for growth | Niche Hold on or withdraw. | Withdraw |
| Weak | Search for a niche Attempt to catch other markets | Niche to withdraw | Withdraw | Withdraw |
| Stage of Industry Maturity |
Portfolio model has its own limitations but it augments managerial thinking and allows marketing managers to think strategically. It allows them to analyze the economies of their operation and the strategic strengths of their business units. They understand that every business unit operates in a different competitive environment and market growth rates vary across product markets.
It helps them to analyze their business plans and refine them to be more sensitive to evolving market conditions. Portfolio models help in identifying weaker business units and unattractive markets and help marketing managers to take decisions relevant to each product-market situation in filling up business information gaps and strengthening their investments in tomorrow’s breadwinners for the company.
The application of portfolio models assumes that companies are ready to invest in growth-oriented businesses, which may lead them to neglect their current business. Models also fail to show the synergy between different businesses.
Such static evaluation may lead to averaging all the SBUs around the center of the chart over a period of time. However, portfolio models are a good application of strategic tools to decide on the allocation of scarce resources of the firm on the basis of market growth rate and relevant competitive position of the firm.
The mobile phone production industry can be said to be at the favorable embryonic stage in India. The reason for this can be seen in the fact that we see an entry of a new mobile set in the Indian market virtually every week.
Though the products might have just a slight variation so as to differentiate a new product from the existing ones, gives the tech-savvy customer a good and convincing enough reason to buy new sets quite frequently.
Similarly, the mobile service-providing industry can be said to be at a favorable growth stage in India since it is quite focused on what to deliver, how to deliver and to whom to deliver; has differentiated services and defends itself very well at the time of environmental threats.