Directional Policy Matrix

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DPM analysis is aimed at determining the appropriate strategic planning goals and the
right strategies to achieve those goals across the portfolio of products, strategic
business units (SBUs) and markets.

In broad terms, the DPM is a framework and process to review the performance and
relative potential of each product/SBU/market and to decide which
products/SBUs/markets to:
Build/develop further/increase market share of
Maintain/resource to keep the status quo or current market share
Harvest/sell off or withdraw from having squeezed the last potential sales
Divest/drop or exit immediately.
DPM PROCESS
For best results, the DPM analysis should involve marketing, sales and operations
managers in both plenary and group sessions. It is very important that all can contribute
and thereby all can own the outcomes. In process terms, the DPM analysis involves
nine steps.
1. DETERMINE MARKETS
The first step is to define and agree the markets/SBUs/product groups or segments that
the business sees itself competing in. This should be heavily informed by the external
perception the customers. For example, in the case of the railway industry in the US
market, customers re-defined the market as transport when the option of car and air
travel became available. Once the markets have been defined, size them in current
sales terms and at your future strategic goal date (say three or five years time).
2. DECIDE MARKET ATTRACTIVENESS FACTORS AND 3. WEIGHT/RANK
For each product/SBU/market segment, establish and agree the four key factors that
define attractiveness relative to the overall market. You then weight their importance
and score where these factors are likely to evolve over the planning period. This yields
a ranking score, which plots that market on the attractiveness axis of the DPM Grid.
Figure 5.1 is an example of market attractiveness ranking for a financial services
product.
4. DEFINE THE CRITICAL SUCCESS FACTORS FOR MARKET POSITION AND 5.
WEIGHT SCORE AND RANK
Decide what the critical success factors are in establishing a strong market position.

Again, weight each factor and score it in relation to its evolution over the planning
period. This then yields a market position ranking on the horizontal DPM Chart Axis
(below). Figure 5.2 shows the market position for the same financial product above.
6. PLOT THE MARKET ATTRACTIVENESS/MARKET POSITIONS ON THE DPM
CHART, 7. AGREE PLANNING GOALS,
8. SET OBJECTIVES. 9. DESIGN STRATEGIES.
Once each product/SBU/market segment has been scored and ranked, the results are
plotted on the DPM chart. According to where each product/SBU/market segment lands
in the nine sectors of the chart, there are planning goals recommended for future
evolution. Guided by these planning goals, the management teams then set objectives
and define strategies to realise those objectives.