Thanks for sharing the image and the additional content.

You're now referring to Shell's

Directional Policy Matrix (DPM) — a strategy tool similar to the GE/McKinsey matrix but
developed by Shell to aid in portfolio analysis and resource allocation.

Let me now create a comprehensive 25-mark answer based on this new content, including:

 Introduction
 How it works
 Matrix explanation (with grid and strategy types)
 Recommended strategies for each cell
 Advantages and disadvantages
 Conclusion

🧭 Shell’s Directional Policy Matrix (25-Mark Answer

Format)

1. Introduction (2 marks)

Shell’s Directional Policy Matrix (DPM) is a strategic portfolio analysis tool designed to
help multinational corporations assess and manage their diverse businesses. Like the GE
Matrix, it evaluates business units based on two axes: Business Prospects (or Sectoral
Attractiveness) and Competitive Capability. However, Shell added greater nuance by
identifying more specific strategies for each zone of the matrix.

2. Purpose of Shell’s DPM (2 marks)

 To allocate resources effectively across strategic business units (SBUs).

 To provide clear investment guidance for each unit.
 To assess whether to grow, maintain, harvest, or divest a business.
 To overcome the oversimplification of other models like BCG.

3. How It Works (4 marks)

 Business units are scored based on:

o Business Prospects (external factors): industry growth, profitability, barriers
to entry.
o Competitive Capability (internal factors): market share, cost position,
innovation.
 The scores are plotted on a 3x3 matrix, creating nine strategic cells.
 Each cell suggests a recommended investment or divestment strategy.
4. Explanation of the Directional Policy Matrix Grid (6 marks)

Business Competitive
Grid Cell Strategy Type Description
Prospects Capability
Full support to maintain
1. Leader High Strong Invest/Expand
leadership.
Selective Invest more to move to
2. Try Harder High Medium
Investment leader position.
3. Double or Invest in potential or quit if
High Weak Selective/Exit
Quit not promising.
Allocate resources for
Moderate
4. Growth Average Avg. Strong growth, avoid
Investment
overinvestment.
Maintain position with
5. Custodial Average Average Maintain
minimal investment.
6. Phased Reduce Reduce support gradually,
Average Weak
Withdrawal Investment possible exit.
7. Cash Exploit business for cash;
Low Strong Harvest
Generation no major investments.
Assets should be
8. Disinvest Low Weak Exit
sold/liquidated.
9. Phased Recover investments, then
Low Average Slow Exit
Withdrawal exit market.

Note: Boundaries are not rigid; Shell observed irregular and overlapping zones.

5. Strategic Recommendations (as per Table 14.2) (3 marks)

Each zone aligns with a specific approach:

 Invest heavily in “Leader” zones.

 Selective growth in “Try Harder” and “Growth” zones.
 Cautious withdrawal or hold in “Custodial” and “Phased Withdrawal”.
 Harvest or exit in low potential zones like “Disinvest” or “Cash Generation”.

6. Advantages of Shell’s DPM (3 marks)

1. ✅ Nuanced analysis: More detailed than BCG or even GE Matrix.

2. ✅ Strategy-oriented: Each cell has a clearly defined strategic implication.
3. ✅ Practical application: Especially suited for large, diversified companies like Shell.
7. Disadvantages of Shell’s DPM (3 marks)

1. ❌ Subjectivity in scoring: Business prospects and competitive capability may be hard

to quantify.
2. ❌ Overlapping zones: Strategic boundaries are not always clear-cut.
3. ❌ Does not factor synergies: Treats SBUs in isolation.

8. Comparison with GE Matrix (1 mark)

Feature GE Matrix Shell’s DPM

Grid Size 3x3 (9 cells) 3x3 (9 cells)
Terminology Attractiveness/Strength Business Prospects/Capability
Strategy Detail Moderate Very Specific

9. Conclusion (1 mark)

Shell’s Directional Policy Matrix is a robust strategic planning tool that helps companies
prioritize investments and manage their business portfolios with granular strategic
direction. Despite some limitations, it remains a valuable framework for complex, multi-
business organizations.

Would you like this integrated into a printable notes PDF or also want MCQs, case-based
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Here's a detailed breakdown of Shell's Directional Policy Matrix based on the provided text
and image:

1. Name and Core Approach: * Known as Shell's Directional Policy Matrix. * Similar to
GE's approach, it plots two key dimensions: Business Prospects and Competitive
Capabilities.

2. Matrix Structure (Figure 14.3: Three-by-three Matrix): * It is a three-by-three

matrix. * Vertical Axis (Y-axis): "SECTORAL PROSPECTS" (also referred to as
"Business Prospects" in the text). * Divided into three levels: Attractive, Average, Low. *
Horizontal Axis (X-axis): "UNIT'S COMPETITIVE POSITION" (also referred to as
"Competitive Capabilities" in the text). * Divided into three levels: Strong, Average, Weak.

3. Identification of Strategies: * The matrix identifies different strategies for each of its
nine grid sectors. * These strategies are explained in Table 14.2 (provided below the image).

4. Strategies for Each Grid Sector (from Table 14.2):

* **1. Leader:**
 * Business Prospects: High
* Competitive Capability: Strong
* Recommended Strategies: High priority with all necessary resources to
hold high market position.

* **2. Try Harder:**

* Business Prospects: High
* Competitive Capability: Medium (Average)
* Recommended Strategies: Allocate more resources to move to leader
position.

* **3. Double or Quit:**

* Business Prospects: High
* Competitive Capability: Weak
* Recommended Strategies: Pick products likely to be future high flyers
for doubling and abandon others.

* **4. Growth:**
* Business Prospects: Average
* Competitive Capability: Avg. Strong (Average/Strong)
* Recommended Strategies: May have some strong competition with no one
company as leader. Allocate enough resources to grow with market.

* **5. Custodial:**
* Business Prospects: Average
* Competitive Capability: Average
* Recommended Strategies: May have many competitors, so maximize cash
generation with minimal new resources.

* **6. Phased Withdrawal:**

* Business Prospects: Low
* Competitive Capability: Average
* Recommended Strategies: Slowly withdraw to recover most of
investments.

* **7. Cash Generation:**

* Business Prospects: Low
* Competitive Capability: Strong
* Recommended Strategies: Spend little cash for further expansion, and
use this as a cash source for faster growing.

* **8. Disinvest:**
* Business Prospects: Low
* Competitive Capability: Weak
* Recommended Strategies: Assets should be liquidated as soon as
possible and invested elsewhere.

* **(Additional Strategy Name from Matrix Grid - not explicitly numbered in

Table 14.2 but present in Figure 14.3):**
* **Harder or Quit:** (This appears in the top-right quadrant, implying
High Business Prospects and Weak Competitive Capability, aligning with
"Double or Quit" but suggesting a slightly different emphasis on the
severity of choice). This name is positioned directly within the grid cell.

5. Shell's Realization during Usage: * Shell observed that the various zones/sectors in their
matrix were of irregular shape. * They also noted that these zones sometimes had
overlapping boundaries.
Based on the combined text description and the provided image
of Shell's Directional Policy Matrix (DPM), here's a clear breakdown of
how it compares to GE's Matrix and its specific framework:

Core Similarity to GE Matrix

 Both are 3x3 portfolio analysis tools evaluating business units on

two composite dimensions:
1. External Attractiveness: "Industry Attractiveness" (GE) /
"Business Prospects" (Shell).
2. Internal Strength: "Competitive Position" (GE) /
"Competitive Capability" (Shell).

Key Differences from GE Matrix

1. Terminology:
o Shell uses "Business Prospects" (Y-axis) and "Competitive
Capability" (X-axis).
o Shell assigns distinct strategic labels to each cell (e.g.,
"Leader," "Try Harder," "Double or Quit").
2. Strategic Recommendations:
o Shell provides more specific, action-oriented
strategies for each grid cell (as detailed in the table).
o GE uses a broader "Stoplight" metaphor (Green/Yellow/Red).
3. Practical Nuance:
o Shell acknowledges that the zones in practice might
be "irregular shape, sometimes with overlapping
boundaries", reflecting real-world complexity.

Shell's Directional Policy Matrix Framework (Based on Image &

Text)
Axes Definitions

1. Business Prospects (Y-Axis - Attractiveness):

o Equivalent to GE's "Industry Attractiveness".
o Represents the overall attractiveness and future
potential of the market/sector the business unit operates
in. This is a compound measure, likely based on factors like
market growth, profitability, stability, and technological
dynamics (similar to GE).
2. Competitive Capability (X-Axis - Strength):
o Equivalent to GE's "Competitive Position".
o Represents the business unit's relative strength and
competitive advantage within its market. This encompasses
factors like market share, technology, management, cost
position, and brand strength.

The 3x3 Grid & Strategic Recommendations

The matrix divides the axes into High (Attractive), Average, Low
(Unattractive) for Business Prospects and Strong, Average, Weak for
Competitive Capability, creating 9 cells.

Competitive Capability
→ Strong Average Weak
Business Prospects ↓

High (Attractive) 1. Leader 2. Try Harder 3. Double or Quit

6. Phased
Average 4. Growth 5. Custodial
Withdrawal

7. Cash 8. Phased
Low (Unattractive) 9. Disinvest
Generation Withdrawal
Detailed Strategic Recommendations (From Table)

1. Leader (High Prospects, Strong Capability):

o Strategy: High priority. Allocate all necessary resources to
maintain leadership position.
2. Try Harder (High Prospects, Average Capability):
o Strategy: Allocate more resources to improve competitive
capability and aim for leadership.
3. Double or Quit (High Prospects, Weak Capability):
o Strategy: Highly selective. Identify specific products/sub-
markets with high future potential ("future high flyers") and
invest heavily ("Double") in those. Abandon ("Quit") the rest of
the business in this segment.
4. Growth (Average Prospects, Strong Capability):
o Strategy: Likely fragmented market with no clear leader.
Allocate sufficient resources to grow at least in line with the
market.
5. Custodial (Average Prospects, Average Capability):
o Strategy: Competitive market. Focus on maximizing cash
generation with minimal new investment ("milk" the position).
6. Phased Withdrawal (Average Prospects, Weak Capability) OR
(Low Prospects, Average Capability):
o Strategy: Gradual exit. Systematically reduce
involvement/scale to recover as much invested capital as
possible over time.
7. Cash Generation (Low Prospects, Strong Capability):
o Strategy: Harvest. Invest minimally for maintenance. Use the
business as a major source of cash to fund growth elsewhere.
8. Disinvest (Low Prospects, Weak Capability):
o Strategy: Immediate exit. Liquidate assets as quickly as
possible and reinvest the proceeds in more attractive areas.
Key Takeaways: Shell's DPM vs. GE Matrix

 Shared Foundation: Both analyze business units based on

external market appeal and internal strength using a 3x3 grid.
 Shell's Action Focus: Shell provides more granular,
prescriptive strategies with distinct names for each cell.
 Shell's Practicality: Shell explicitly recognizes the fuzziness of
boundaries between zones in reality.
 Nuanced Strategies: Shell offers specific paths for complex
situations, especially:
o "Double or Quit" for attractive markets where the company
is weak (high-risk/high-reward bet).
o "Cash Generation" for strong positions in declining markets
(explicit cash cow focus).
o "Phased Withdrawal" applied to both (Avg Prospect/Weak
Capability) and (Low Prospect/Avg Capability) situations.
 GE's Process Rigor: GE emphasizes the detailed, weighted
scoring methodology for calculating the indices.

In essence: While GE provides a rigorous diagnostic framework, Shell's

DPM translates the diagnosis into highly specific, named strategic actions
for each possible position within the portfolio.