The Company Position/Industry Attractiveness Screen

This technique provides a framework for charting or categorizing the different businesses in a firm’s portfolio and determining the implications for resource allocation. Techniques for portfolio analysis have their greatest applicability in developing strategy at the corporate level and in aiding in corporate review of business units. This technique can also be used in competitor analysis if the competing firm is using it in strategic planning.

The company position/industry attractiveness screen is variously attributed to General Electric, McKinsey and Company, and Shell. The two axes in this approach are the attractiveness of the industry and the strength, or competitive position, of the business unit. Where a particular business unit falls along these axes is determined by an analysis of that particular unit and its industry, using criteria like those listed in the boxes below. Depending on where a unit falls on the matrix, its broad strategic mandate is either to invest capital to build position, to hold by balancing cash generation and selective cash use, or to harvest or divest. Expected shifts in industry attractiveness or company position lead to the need to reassess strategy. A firm can plot its portfolio of businesses on such a matrix to insure that the appropriate allocation of resources is made. The firm can also try to balance the portfolio in terms of its mix of developing and developed businesses and the internal consistency of cash generation and cash use.

  • Size
  • Market Growth, Pricing
  • Market Diversity
  • Competitive Structure
  • Industry Profitability
  • Technical Role
  • Social
  • Environmental
  • Legal
  • Human
  • Size
  • Growth
  • Share
  • Position
  • Profitability
  • Margins
  • Technological Position
  • Strengths/Weaknesses
  • Image
  • Pollution
  • People

The company position/industry attractiveness screen is less precisely quantifiable than the growth/share approach, requiring inherently subjective judgments about where a particular business unit should be plotted. It is often criticized for being more vulnerable to manipulation. As a result, sometimes quantitative weighting schemes, using criteria determined to lead to industry attractiveness or company position in the particular industry, are employed to make the analysis more “objective.” The screening technique reflects the assumption that every business unit is different and requires its own analysis of competitive position and industry attractiveness. As noted above, actually constructing the growth/share portfolio in practice involves the same type of particularistic analysis of each business unit. Hence its actual “objectivity” may really not be far from that of the company position/industry attractiveness screen.

Like the growth/share portfolio matrix, the company position/industry attractiveness screen offers little but a basic consistency check in formulating competitive strategy for a particular industry. The real issues involve deciding where to plot the business on the grid, deciding if position on the grid implies the indicated strategy and working out a detailed strategic concept for building, holding, or harvesting. These steps require the sort of detailed analysis described in this book, because the criteria listed above are far from sufficient to determine industry attractiveness, company position, or the appropriate strategy.

Competitor Analysis

The screen can play a part in competitor analysis, in much the same way as the growth/share matrix can. It can be used to construct competitors’ portfolios at different points in time and to gain some insight into what strategic mandate a competitor’s business unit may be receiving from its corporate office. Whether to use the growth/share or company position/industry attractiveness technique is largely a matter of taste (basically the same analysis is required to use either of the techniques properly), unless a competitor is known to use one or the other. In the latter case the best predictive power is gained from the technique the competitor itself uses. Note that the growth/share technique is inextricably tied with the experience curve concept. Hence if a competitor is known to be strongly influenced by the experience curve concept, the growth/share portfolio approach will probably be a better predictor of its goals and behavior.