Strategic Environments Matrix

The Strategic Environments Matrix was created by the Boston Consulting Group, one of the leading strategy consultancies in the world to explain why some industries were much more open to competitive advantage than others.

This follows criticisms of it’s most famous creation, the Growth/Share Matrix.

This split the business world into four quadrants based on:

  • The rate of market growth – often 5% per year or a few percentage points above the growth of the wider economy (GDP).
  • The relative market share measured by your market share divided by your largest competitor.

Those quadrants were:

  • High growth, high market share – a “star” business where the recommended aim was to hold/build market share
  • Low growth, high market share – the “cash cow” business which generates lots of cash to be spent elsewhere
  • High growth, low market share – “a question mark” business where industry prospects were good but the firm was weak compared to competitors.
  • Low growth, low market share – supposedly “dogs” which no one wanted – as a dog owner I object to the term but more importantly, the majority of businesses fell into this category. By definition there can only be a few industries growing much faster than the economy and there is only one market share leader.

The Strategic Environments Matrix was created to give guidance to other businesses and especially those where market share didn’t give a huge advantage.

It looks at the different ways competitive advantage can be created and the strength of the competitive advantage.

In Fragmented Industries (like many small, local markets), there are plenty of ways to create an advantage although the size will be small and will focus on serving local communities or small niches.

In Specialised Industries, there are again many ways to create an advantage and the size of that advantage can be significant. It’s based on a strong niching strategy built on national / international demand.

Volume Industries are the traditional “big is best” markets where size really matters.

Stalemate Industries are where potential competitive advantages are few and their impact is small. This may be real or perceived because no one has successfully challenged “that’s the way we work in our industry”.

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