The ADL matrix is a portfolio analysis technique. It was developed in the 1970s by the consulting firm Arthur D. Little, Inc.
The ADL matrix is based on the assumption that the profit generation of a product is the result of the company's competitive position on the one hand and the degree of maturity of the industry on the other. This means that the product has a greater ability to generate a surplus when it is in a more competitive position.
According to many authors, the source of the company's market success is primarily product innovations. They enable all units of the company to develop beyond its competitors and to achieve a leading market position. These are mainly products in the mature and declining sectors.
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ADL matrix structure
The design of the ADL matrix is based on two variables:
- Industry maturity level (market)
- Degree of competitiveness of a product or the competitive position of a company.
|Industry maturity / level of competitiveness||Start up||growth||Maturity||Decrease|
Phases of sector maturity
The maturity size sector consists of four phases:
- Start up
Types of competitive position
There are five dimensions of competitive position:
- Leadership - offers the opportunity to control the behavior of competitors
- A strong policy enables decision-making in an area of your choice without affecting your position in the long term
- Inexpensive - gives a good chance to implement the strategy and maintain your position in the long term
- Unfavorable - justifies the continuation of the activity, if the results are sufficient, the general tolerance of the strongest competitors can be used
- Marginal - gives the chance to improve the situation despite the unsatisfactory results, but the improvement must be significant
The ADL matrix comprises 20 to 30 fields, depending on the number of phases analyzed. Circles are placed in these fields that reflect homogeneous products or product groups. This enables managers to properly allocate resources and control product strategies. This also results in the development of the optimal product portfolio of the most profitable products. The ADL matrix is associated with natural strategies and strategic trajectories.
Advantages of the ADL matrix
- Flexibility in assessing the attractiveness of the industry
- Ability to balance a portfolio of production
- Better identification of competition, suppliers, customers, potential substitutes
- Allows the strengths of the product portfolio to be extracted
Disadvantages of the ADL matrix
- Limited practicability
- Excessive empiricism and subjectivity in the application of the criteria for determining the main dimensions