Rules of design
Matrix is created on the basis of two criteria: the maturity of the sector, divided into 5 phases and the competitive position of companies in the sector. In this way circles are created, which represent different areas of activity in the company, and the size of the circle is proportional to size of the sector. Sometimes segments could be added to the circle, which reflect the market share of company in the sector.
Below is a sample matrix constructed according to the principles set out by Hofer. In its interpretation attention should be paid to possible strategies for products, their life cycle phases and the markets in different sectors.
Interpretation of fields
In Hofer matrix, we can characterize groups of products:
- Products A - Dilemmas that have chance of success with appropriate marketing strategies and financial aid
- Products B - Winners, require appropriate marketing strategies and financial aid, if company has limited resources for advertising managers must make a choice between products A and B
- Products C - Potential losers, the weak position, the sector in the growth phase - managers should make additional analyses to rule out the possibility of going through the shock phase
- Products D - despite the current difficulties can become market leaders or profitable producers
- Products E and F are profitable, so it is possible to introduce other products in the phase of shock and generate considerable profits
- Products G and H are the losers are in the exit phase of the market, ahead of the full withdrawal managers should use strategies for "gathering the harvest"
- Chrisman, J. J., Hofer, C. W., & Boulton, W. B. (1988). Toward a system for classifying business strategies. Academy of Management Review, 13(3), 413-428.
- Hofer, C. W., & Schendel, D. (1980). Strategy formulation: Analytical concepts. West Publishing.
- Hofer, C. W. (1975). Toward a contingency theory of business strategy. Academy of Management journal, 18(4), 784-810.
- McNamee, P. B. (1985). Tools and techniques for strategic management. Oxford: Pergamon Press.
- Pethia, R. F., & Saïas, M. (1978). Metalevel product-portfolio analysis: An enrichment of strategic planning suggested by organization theory. International Studies of Management & Organization, 8(4), 35-66.
- Smith, C. (1971). Portfolio Management. Wiley Encyclopedia of Management.