In 1975, the British-Dutch chemical organization Shell developed and introduced into the practice of strategic analysis and planning its own model, called the Direct Policy Matrix. Its appearance was directly related to the peculiarities of the dynamics of the economic environment in the conditions of the energy crisis that took place at that time: the overflow of the world market with crude oil, the steady fall in crude oil prices, low and constantly declining industry profit margins, high inflation. Traditional financial forecasting methods proved to be useless when it came to choosing a long-term investment strategy in such conditions. In contrast to the BCG and GE/McKinsey models already widespread at the time, the Shell/DPM model relied least of all on assessing the achievements of the analyzed organization in the past and mainly focused on analyzing the development of the current industry situation.

In such vertically integrated corporate structures as the Shell structure, as well as in the structures of most other large oil organizations, decisions are required both about the financing of individual refineries and other business units, and about the allocation of available volumes of crude oil. This condition makes it difficult to directly use models of strategic analysis and planning such as the BCG matrix. Another complication is that the entire business in such organizations is built around one production line, on which separate business units share the same production equipment among themselves. The whole set of products targeted at various market segments is the output of the same refinery, and thus the corresponding volumes and production costs, as well as profits, turn out to be completely interdependent. In addition, it should be added that very often products coming out of one such plant simply compete with each other in the market.

The Shell/DPM matrix is ​​similar in appearance to the GE/McKinsey matrix and is a kind of development of the idea of ​​strategic business positioning, which is the basis of the BCG model. However, there are fundamental differences between them. But compared to the one-factor BCG 2x2 matrix, the Shell/DPM matrix, like the GE/McKinsey matrix, is a two-factor 3x3 matrix based on multiple assessments of both qualitative and quantitative business parameters. Moreover, the multivariate approach used to assess the strategic position of a business in the GE/McKinsey and Shell/DPM models turned out to be more realistic in practice than the approach used by the BCG matrix.

The Shell/DPM model puts even more emphasis on business quantification than the GE/McKinsey model. If the strategic choice criterion in the BCG model was based on the assessment of cash flow (Cash Flow), which, in fact, is an indicator of short-term planning, and in the GE / McKinsey model, on the contrary, on the assessment of return on investment (Return of Investments), which is an indicator of long-term planning, the Shell / DPM model suggests that when making strategic decisions, focus simultaneously on these two indicators.

The other most notable feature of the Shell/DPM model is that it can consider businesses at different stages of their life cycle. Therefore, consideration of the change in the picture of the strategic positioning of business types after some time becomes an integral part of modeling on Shell / DPM.

But despite the apparent advantages of the Shell / DPM model as a matrix of multi-parametric strategic analysis, its popularity has been limited to a number of very capital-intensive industries, such as chemistry, oil refining, and metallurgy.

Initially, when using the DPM model, the Shell organization was more concerned with ensuring a rational cash flow. In the literature, one can find a description of the first use of the DPM model as a criterion for classifying types of business when deciding on the allocation of financial, material and highly skilled labor resources.

However, later it was noticed that individual cells of the 3x3 matrix of strategic positioning are oriented towards the “cash generation” strategy. Therefore, such a model is suitable both for analyzing business dynamics in terms of the prospects for return on initial investment, and for analyzing the financial balance sheet of the entire business portfolio of an organization in terms of cash flow. The underlying idea of ​​the Shell/DPM model is the idea, borrowed from the BCG model, that the overall strategy of the organization should be to maintain a balance between cash surplus and cash deficit by developing promising new businesses based on the latest scientific and technological developments that will absorb excess money supply generated by businesses that are in the maturity phase of their life cycle. The Shell/DPM model directs managers to redistribute certain cash flows from business areas that generate money in a business area with a high potential for return on investment in the future.

Structure of the Shell/DPM Model

Like all other classic strategic planning models, the DPM model is a two-dimensional table, where the X and Y axes reflect the strengths of the organization (competitive position) and industry (product-market) attractiveness, respectively (Fig. 11). More precisely, the x-axis reflects the competitiveness of the organization's business sector (or its ability to take advantage of the opportunities available in the relevant business area). The y-axis is thus a general measure of the state and prospects of an industry.

Rice. 11. Shell/DPM Model Representation

The breakdown of the Shell/DPM model into 9 cells (in the form of a 3x3 matrix) was not done by chance. Each of the 9 cells corresponds to a specific strategy.

Position "Business Leader"

The industry is attractive and the organization has a strong position in it, being a leader; the potential market is large, the market growth rate is high; Weaknesses of the organization, as well as obvious threats from competitors, are not noted.

Possible Strategies: continue to invest in the business as long as the industry continues to grow, in order to protect its leading position; large capital investments will be required (more than can be provided by own assets); continue to invest, sacrificing momentary gains in the name of future profits.

Position “Growth strategy”

The industry is moderately attractive, but the organization has a strong position in it. Such an organization is one of the leaders, which is in the mature age of the life cycle of this business. The market is moderately growing or stable, with good margins and no other strong competitor present.

Possible Strategies: try to maintain their positions; the position may provide the necessary funds for self-financing and also provide additional money that can be invested in other promising areas of the business.

Position “Cash Generator Strategy”

The organization occupies a fairly strong position in an unattractive industry. It is, if not the leader, then one of the leaders here. The market is stable but shrinking, and the rate of return in the industry is declining. There is also a certain threat from competitors, although the productivity of the organization is high and the costs are low.

Possible Strategies: A business that falls into this box is the main source of income for the organization. Since no development of this business is required in the future, the strategy is to make small investments, extracting the maximum income.

Position “Strategy for Strengthening Competitive Advantages”

The organization occupies a middle position in an attractive industry. Since the market share, product quality, and reputation of the organization are high enough (almost the same as that of the industry leader), the organization can become a leader if it allocates its resources appropriately. Before incurring any costs in this case, it is necessary to carefully analyze the dependence of the economic effect on investments in this industry.

Possible Strategies: invest if the business area is worth it, while doing the necessary detailed investment analysis; to move into a leadership position, large investments will be required; a business area is considered highly suitable for investment if it can provide increased competitive advantage. The required investment will be greater than the expected return and therefore additional capital investment may be required to further compete for market share.

Position “Continue business with care”

The organization occupies an average position in the industry with an average attractiveness. The organization does not have any special strengths or opportunities for additional development; the market is growing slowly; the industry average rate of return is slowly declining.

Possible Strategies: Invest carefully and in small portions, being sure that the return will be quick, and constantly conduct a thorough analysis of your economic situation.

Position “Partial Curtailment Strategies”

The organization is in the middle position in an unattractive industry. The organization has no particular strengths and, in fact, no opportunities for development; the market is unattractive (low rate of return, potential excess capacity, high capital density in the industry).

Possible Strategies: since it is unlikely that, getting into this position, the organization will continue to earn significant income, so far as the proposed strategy will not develop this type of business, but try to turn physical assets and market position into the money supply, and then use its own resources to develop more promising business.

Position “Double production or wind down the business”

The organization is in a weak position in an attractive industry.

Possible Strategies: invest or leave this business. Since an attempt to improve the competitive position of such an organization by attacking on a broad front would require a very large and risky investment, insofar as it can only be undertaken after a detailed analysis. If it is established that the organization is capable of competing for a leading position in the industry, then the strategic line is “doubling down”. Otherwise, the strategic decision should be to leave the business.

Position “Continue business with caution or partially curtail production”

The organization is in a weak position in a moderately attractive industry.

Possible Strategies: no investment; all management should be focused on the balance of cash flow; try to stay in this position as long as it makes a profit; phase out the business.

Position “Business exit strategy”

The organization is in a weak position in an unattractive industry.

Possible Strategies: Since an organization that falls into this box is generally losing money, every effort should be made to get rid of such a business, and the sooner the better.

The following variables can be used in the Shell/DPM model to characterize an organization's competitiveness and industry attractiveness (Table 6).

Table 6 Organizational competitiveness and industry attractiveness variables used in the Shell/DPM model

Like many other classical models of strategic analysis and planning, the Shell/DPM model is descriptive and instructive. This means that the manager can use the model both to describe the actual (or expected) position determined by the relevant variables, as well as to determine possible strategies. The strategies defined should, however, be considered with caution. The model is designed to help make managerial decisions, not replace them.

The Shell/DPM model can also take time into account. Since each segment represents a specific point in time, a manager who wants to see changes after a certain period needs only to use the database for each period and compare the results. It should be noted that this model is especially effective for visualizing changes and developing strategic positions over time, since it is not tied to financial indicators and, therefore, is not influenced by factors that can cause errors (for example, inflation).

Strategic decisions based on the Shell/DPM model depend on whether the manager's focus is on the life cycle of the type of business or the organization's cash flow.

In the first case (Fig. 11, direction 1), the following trajectory for the development of the organization’s positions is considered optimal: from Doubling the volume of production or closing the business - to the Strategy for strengthening competitive advantages - to the Strategy of the leader of the type of business - to the Growth strategy - to the Cash generator strategy - to Strategies of partial curtailment - to the Strategies of curtailment (exit from business).

Let us give a brief description of the stages of such a movement.

Stage of doubling production or winding down the business

A new area of ​​business is selected, which, of course, needs to be developed as part of the overall corporate strategy. The market is attractive, but since the business area is new to the organization, the organization's competitive position in this business is still weak. Strategy is investment.

Stage of strengthening competitive advantages

With investment, the position of the organization in the business area improves, which is the reason for the horizontal movement to the right edge of the matrix. The market continues to grow. The strategy is to keep investing.

Business type leader stage

With continued investment, the organization's position in the business area continues to improve, which is the reason for further horizontal movement to the right. The market continues to grow and investment continues.

growth stage

The growth rate of the market is starting to slow down. This causes the beginning of the vertical movement of the organization's position down. The profitability of the business area for the organization is growing at the same level as the industry average.

Cash Generator Stage

The development of the market stops, causing further downward movement of the organization's position. The strategy is to invest only at the level necessary to maintain the achieved positions and ensure the profitability of the business.

Partial coagulation stage

The market begins to shrink, the profitability of the industry decreases, and the position of the organization naturally also begins to weaken.

Further investment in this business can be completely stopped, and then a decision is made to curtail it altogether.

In the case of increased attention to the cash flow (Fig. 11, direction 2), the trajectory of the development of the organization's positions from the lower right cells of the Shell/DPM matrix to the upper left ones is considered to be optimal. This means that the cash generated by the organization during the Cash Generator and Drawdown stages is used to invest in business areas that are in line with Doubling Output and Strengthening Competitive Advantage positions.

Strategic balance involves, first of all, the balance of the efforts of the organization in each of the business areas, depending on the stage of the life cycle in which they are. This balancing ensures that at the maturity stage of the business area there will always be sufficient financial resources to support the organization's reproduction cycle by investing in new promising types of business. Financial balance means that income-generating businesses have sales that are sufficient to finance a growing business.

Strengths and weaknesses of the Shell/DPM model

Most of the underlying theoretical assumptions in the Shell/DPM model are similar to those in the GE/McKinsey model.

Allocation as the X axis of the competitiveness of the organization's business suggests that the market is an oligopoly. That is why for organizations with a weak competitive position, a strategy of instantaneous or gradual curtailment of such a business is recommended. It is assumed that the existing gap in the competitive position of organizations by type of business will necessarily increase if a new source of competitive advantage is not found.

The Y-axis (attractiveness of the business sector) suggests the existence of long-term development potential for all participants in this business, and not just for the organization in question.

In practice, there are two main mistakes when using the Shell/DPM model, which are essentially the same as for the GE/McKinsey model. First, managers often take the strategies recommended by this model very literally. Secondly, it is also common to attempt to evaluate as many factors as possible, with the implication that this will lead to a more objective picture. In fact, the opposite effect occurs and organizations whose positions are evaluated in this way, as a rule, always end up in the center of the matrix.

One of the main advantages of the Shell/DPM model is that it solves the problems of combining qualitative and quantitative variables into a single parametric system. Unlike the BCG matrix, it does not depend directly on the statistical relationship between market share and business profitability.

As a criticism, the following can be said:

• the choice of variables for analysis is very conditional;
• there is no criterion by which one could determine how many variables are required for analysis;
• it is difficult to assess which of the variables are most significant;
• assigning specific weights to variables when constructing matrix scales is very difficult;
• it is difficult to compare business areas across industries, as the variables are highly industry-specific.

1. Hichens R.E., Robinson S.J.Q. and Wade D.P.. The Directional Policy Matrix: A Tool for Strategic Planning. Long Range Planning, Vol. 11 (June 1978), pp. 8-15.

Human factor - a set of factors and conditions that ensure the accident-free activity and performance of a person and aspects of his interaction with systems that are usually not considered in the framework of basic research in the field of microergonomics. And this is interaction and relationships with other participants in joint activities, with factors of the physical, as well as social environment in the conditions of joint activities. At the same time, the Black Sea Fleet is understood as a set of professional, psychological and social capabilities and limitations of all participants in the activity, not taking into account which, when designing aircraft, organizing the maintenance and conditions of flight activity, can lead to erroneous actions.

Currently, when analyzing factors Black Sea Fleet (ICAO) uses the “SHEL” model, the abbreviation of which is made up of the initial letters of the English names of its constituent elements: Software, Hardware, Environment, Liveware. The SHEL model was first developed by Edwards in 1972. and then in 1975. supplemented by the Hawkins diagram illustrating it (Fig.). The components included in the model mean the following:

Software - procedures.

Hardware - machine (object).

Environment - environment.

Liveware is a person (subject).

In ICAO materials, the concept Black Sea Fleet Edwards is accepted as the main one and is an extended version of the conceptual model " man-machine-environment ».

In this model, the following interpretation is proposed:

- Subject (Liveware): performer (L1) or other performers interacting with him (L2), their biological and medical, physiological, psychophysiological, psychological, social and psychological resources.

- Object (Hardware): the machine is the ergonomic characteristics of workplaces: controls and information display systems, etc.

- Procedures (Software):(manuals, technologies, installations, norms, rules, etc..

-Environment (Environment): natural and microclimatic conditions in which the components that make up the model must interact.

In this model, matching or non-matching block boundaries

(interfaces) are important, as are the characteristics of the blocks themselves. The subject (executor of activity) is the central "nodal" part of the SHELL model. The remaining components must be adapted and matched accordingly

with this "nodal" part.

To analyze possible failures in the system of joint activities, it is recommended to investigate the state of the following lines of interconnection of components:

Subject - object (L-H).

Subject - installations (L-S).

Subject - environment (L-E).

Subject - subject (L-L).

Subject - object. The relationship between the human and machine interface is considered, namely:

taking into account the characteristics of the human body; taking into account the possibilities of assimilation of information by the user; as well as controls, their coding and placement in the workplace.

Subject - procedures. The relationship of a person with such components as rules, guidelines and other documents regulating the work is considered.

The subject is the environment. The relationship of the type "man - environment" in the process of activity was one of the first to be established.

Subject - subject. The feature of interaction and mutual relations of people at joint activity is considered.

According to the Human Factors Training Manual (ICAO), theoretical sources in the study of the influence of the human factor in the areas of its influence are such sciences as:

Psychology and human physiology;

Anthropometry and biomechanics;

Biology and chronobiology.

PSYCHOLOGICAL SYSTEM OF ACTIVITY (PSD) - is a psychological structure of activity, organized in terms of performing the functions of a specific activity, achieving a specific goal.

This is the Directed Policy Matrix (DPM), which was developed by the British-Dutch company Shell. The Shell/DPM model was created as a development of the Boston Advisory Group (BCG) model. The directional policy matrix has an outward resemblance to the General Electric-McKinsey matrix, but at the same time it is a kind of development of the idea of ​​​​strategic business positioning, embedded in the BCG model. The Shell/DPM matrix is ​​a two factor 3x3 matrix. It is based on assessments of both quantitative and qualitative business parameters. Along the axes of the Shell/PDM matrix are the following indicators:

business industry perspectives;

business competitiveness.

The Shell/DPM model puts more emphasis on estimating quantitative parameters. The Shell/DPM model evaluates both cash flow (BCG matrix) and return on investment (GE-McKinsey matrix). As in the GE-McKinsey model, businesses that are at different stages of their life cycle can be valued here.

The X-axis in the directed policy matrix reflects the strengths of the enterprise (competitive position), and the Y-axis reflects industry attractiveness. The y-axis is a general measure of the state and prospects of an industry.

Rice. 1. Shell Directed Policy Matrix.

Each of the nine cells of the matrix corresponds to a specific strategy: Business leader - the company has a strong position in an attractive industry. The development strategy of the enterprise should be aimed at protecting its leading positions and further developing the business.

Growth strategy– the company has a strong position in a moderately attractive industry. The company needs to try to maintain its position.

Cash Generator Strategy The company has a strong position in an unattractive industry. The main task of the enterprise is to extract the maximum income.

Strategies for Strengthening Competitive Advantage The company is in the middle position in an attractive industry. It is necessary to invest in order to move into a leadership position. Proceed with caution - the company is in the middle position in the industry with an average attractiveness. Careful investment with a quick return.

Partial collapse strategy The company is in the middle position in an unattractive industry. You should extract the maximum income from what is left, and then invest in promising industries. Doubling the volume of production or winding down the business - the company is in a weak position in an attractive industry. The company must either invest or leave the business. Continue business with caution or partially curtail production - the company is in a weak position in a moderately attractive industry. Try to stay in the industry while it makes a profit.

Business exit strategy The company is in a weak position in an unattractive industry. The company needs to get rid of such business. Essentially, the Shell Matrix suggests keeping the focus on cash flow and evaluating return on investment. The main idea of ​​the matrix is ​​that the overall strategy of the organization should maintain a balance between the cash surplus and its deficit by regularly developing new promising types of business based on the latest scientific and technological developments that will absorb the excess money supply generated by the types of business that are in maturity phase of its life cycle. The Shell Matrix focuses on the redistribution of certain financial flows from business areas that generate money supply to business areas with a high potential for return on investment in the future. Shell has also added a number of recommendations to its matrix and provides an additional decision table (Table 1).

Table 1. Decision table depending on the prospects for profit and return on investment

As with the BCG and GE-McKinsey matrices, the matrix in the literature identifies company competitiveness and industry attractiveness variables, which are used in the construction of the Shell/DPM matrix and the behavior of portfolio analysis (Table 3).

Table 3. Variables of company competitiveness and industry attractiveness.

The Shell/DPM model was created as a development of the Boston Advisory Group (BCG) model. The Directed Policy Matrix has a superficial resemblance to matrix "General Electric - McKinsey", but at the same time, it is a kind of development of the idea of ​​strategic business positioning, embedded in the BCG model. The Shell/DPM matrix is ​​a 3x3 two-factor matrix. It is based on assessments of both quantitative and qualitative business parameters.

The following indicators are located along the axes of the Shell/DPM matrix:

• business industry perspectives;
• business competitiveness.

The Shell/DPM model puts more emphasis on quantification than the GE-McKinsey model. The Shell/DPM model evaluates both cash flow (BCG matrix) and return on investment (GE-McKinsey matrix). As in the GE-McKinsey model, business types that are at different stages of the life cycle can be evaluated here.
The X-axis in the directed policy matrix reflects the strengths of the enterprise (competitive position), and the Y-axis reflects industry attractiveness. The y-axis is a general measure of the state and prospects of an industry.

rice. 1. Shell Directed Policy Matrix.

Each of the nine cells of the matrix corresponds to a specific strategy:

• Business leader - the company has a strong position in an attractive industry. The development strategy of the enterprise should be aimed at protecting its leading positions and further developing the business.
• Growth strategy - the company has a strong position in a moderately attractive industry. The company needs to try to maintain its position.
• Cash Generator Strategy - The company is in a strong position in an unattractive industry. The main task of the enterprise is to extract the maximum income.
• Competitive advantage strategy - the company occupies a middle position in an attractive industry. It is necessary to invest in order to move into a leadership position.
• Continuing business with caution - the company is in the middle position in the industry with an average attractiveness. Careful investment with a quick return.
• Partial exit strategy - the company is in the middle position in an unattractive industry. You should extract the maximum income from what is left, and then invest in promising industries.
• Double production or wind down the business - the company is in a weak position in an attractive industry. The company must either invest or leave the business.
• Continue business with caution or partially curtail production - the company occupies a weak position in a moderately attractive industry. Try to stay in the industry while it makes a profit.
• Exit strategy - the company is in a weak position in an unattractive industry. The company needs to get rid of such business.

Essentially, the Shell Matrix suggests keeping the focus on cash flow and evaluating return on investment. The main idea of ​​the matrix is ​​that the overall strategy of the organization should maintain a balance between the cash surplus and its deficit by regularly developing new promising types of business based on the latest scientific and technological developments that will absorb the excess money supply generated by the types of business that are in maturity phase of its life cycle. The Shell Matrix focuses on the redistribution of certain financial flows from business areas that generate money supply to business areas with a high potential for return on investment in the future.
Shell has also added a number of recommendations to its matrix and provides an additional decision table (Table 1).

Table 1. Decision table depending on the prospects for profit and return on investment

As for the BCG and GE-McKinsey matrices, the matrix in the literature identifies company competitiveness and industry attractiveness variables, which are used in the construction of the Shell/DPM matrix and the behavior of portfolio analysis (Table 2).

Table 2. Variables of company competitiveness and industry attractiveness.

Another model of strategic analysis is the "directed policy matrix", which was developed by the British-Dutch company Shell. The directional policy matrix has an outward resemblance to the General Electric - McKinsey matrix, but at the same time it is a kind of development of the idea of ​​​​strategic business positioning embedded in the BCG model. The Shell/DPM matrix (Fig. 3.4) is a 3x3 two-factor matrix. It is based on assessments of both quantitative and qualitative business parameters. The following indicators are located along the axes of the Shell/DPM matrix:

• - perspectives of the business sector;
• - business competitiveness.

The X-axis in the directed policy matrix reflects the strengths of the enterprise (competitive position), and the Y-axis reflects industry attractiveness. The y-axis is a general measure of the state and prospects of an industry.

Rice. 3.4.

Each of the nine cells of the matrix corresponds to a specific strategy:

• - business leader - the company has a strong position in an attractive industry. The development strategy of the enterprise should be aimed at protecting its leading positions and further developing the business;
• - growth strategy - the company has a strong position in a moderately attractive industry. The company needs to try to maintain its position;
• - cash generator strategy - the company has a strong position in an unattractive industry. The main task of the enterprise is to extract the maximum income;
• - strategy of strengthening competitive advantages - the company occupies a middle position in an attractive industry. It is necessary to invest in order to move into a leadership position. Continuing business with caution - the company is in the middle position in the industry with an average attractiveness. Cautious investment with a quick return;
• - partial curtailment strategy - the company occupies an average position in an unattractive industry. You should extract the maximum income from what is left, and then invest in promising industries.

Double production or curtail business - the company is in a weak position in an attractive industry. The company must either invest or leave the business. Continue business with caution or partially curtail production - the company occupies a weak position in a moderately attractive industry. Try to stay in the industry while it makes a profit;

Exit strategy - the company is in a weak position in an unattractive industry. The company needs to get rid of such business.