The Arthur D. Little (ADL) Strategic Condition Matrix is a business framework related to strategy formulation and portfolio management. ADL has two main dimensions: 1. Competitive Position and 2. Industry Maturity.
Competitive Position is driven by the sectors or segments in which a Strategic Business Unit (SBU) operates. The product or service which it markets, and the accesses it has to a range of geographically dispersed markets that are what makes up an organization’s competitive position i.e. product and place.
Industry Maturity is very similar to the Product Life Cycle (PLC) and could almost be renamed an “Industry Life Cycle.” Of course not only industries could be considered here but also segments. It is a combination of the two aforementioned dimensions that helps us to use ADL for marketing decision-making. Now let’s consider options in more detail.
Competitive Position has 5 main categories:
- Dominant – This is a particularly extraordinary position. Often this is associate with some form of monopoly position or customer lock-in e.g. Microsoft Windows being the dominant global operating system.
- Strong – Here companies have a lot of freedom since position in an industry is comparatively
- powerful e.g. Apple’s iPod products.
- Favorable – Companies with a favorable position tend to have competitive strengths in segments of a fragmented market place. No single global player controls all segments. Here product strengths and geographical advantages come into play.
- Tenable – Here companies may face erosion by stronger competitors that have a favorable, strong or competitive position. It is difficult for them to compete since they do not have a sustainable competitive advantage.
- Weak – As the term suggests companies in this undesirable space are in an unenviable position. Of course there are opportunities to change and improve, and therefore to take an organization to a more favorable, strong or even dominant position.
The ADL portfolio management approach uses an industry assessment and a business strength assessment as its dimensions. The industry measurement is an identification of the life cycle of the industry. The business strength measure is a categorization of the corporation’s SBU’s into one of five (six) competitive positions: dominant, strong, favorable, tenable, weak (and non-viable). This yields a matrix of 5 competitive positions by 4 life cycle stages. Positioning in the matrix identifies a general strategy.
Defining the line of business in the ADL matrix
In the ADL Matrix approach, the strategist must identify discrete businesses by finding commonalities among products and business lines using the following criteria as guidelines:
- Common rivals
- Divestment or liquidation
Assessing the Industry Life Cycle stage in the ADL Matrix
The assessment of the Industry Life Cycle stage of each company is made on the basis of:
- Business market share,
- Investment, and
- Profitability and cash flow.
Assessing the competitive position in the ADL Matrix
The competitive position of a firm is based on an assessment of the following criteria:
- Dominant. Rare, often the result from a almost-monopoly or protected leadership.
- Strong. A strong company can follow a strategy without too much consideration of moves by rival companies.
- Favorable. Industry is fragmented. No clear leader among stronger rivals.
- Tenable. The company has a niche, either geographical or defined by the product.
- Weak. Business is too small to be profitable or survive over the long term. Critical weaknesses.
Some known limitations of the ADL Matrix are:
- There is no standard life cycle length.
- Determining the current industry life cycle phase is difficult.
- Competitors may influence the length of the life cycle.