Hofers Cell Matrix

8/3/2019 Hofers Cell Matrix

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Prepared ByMohsin Mohammed Ali

MBA/7017/10


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The business portfoliois the collection ofbusinesses and products that make up thecompany. The best business portfolio isone that fits the company's strengths and

helps exploit the most attractiveopportunities.


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Business portfolio analysis as an

organizational strategy formulation techniqueis based on the philosophy that organizationsshould develop strategy much as they handleinvestment portfolios. Just as sound financialinvestments should be supported and

unsound ones discarded, soundorganizational activities should beemphasized and unsound onesdeemphasized.


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Charles W. Hofer and Dan Schendel, theydescribed seven stages of the life cycle,each with certain characteristics by whichthe position of the market can be identified.


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A significant contribution in the field of strategic businessportfolio analysis belongs to Charles W. Hofer.

The specialty literature mentions in under the name of

HoferMatrix or "Product/Market Evolution Matrix.

He proposed a new assessment matrix of businessportfolio of a company, organized into 15 quadrants. Thepicture below displays the matrix where strategic

business units are graphically represented according totwo basic indicators: competitive position on the marketand the stage corresponding to the product/marketevolution.


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He took series of research studies

showing thatthe stage of the life cycle of

the product representsa factor that

influences to greater or smaller extentthe

success of a strategy


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Charles W. Hofer described seven stages of the life cycle,each with certain characteristics by which the position ofthe market can be identified.


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Hofer matrix implies the division of the company intostrategic business units.

Assessing the competitive position of businessunits.

The position occupied by the strategic business unitis graphically represented by using the two axes of

the matrix. Thus, on the vertical axis the competitiveposition of strategic business units is set and on thevertical axis the stage of the life cycle specific to themarket where these operate is set.


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Further on, strategic business units are outlined,from a graphical point of view, under the form ofcircles. The size of each circle is proportional to the size of the

market where the strategic business unit carries out itsactivity (measured on the basis of total income resulted onthe mentioned markets), while the hatched areas, inside thecircle, represent the market shares held by the strategicbusiness units.


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A

B C

D

E

F

G

HOFERS MATRIX EXAMPLE


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Business unit A

It would to be a developing winner. Its relatively large share of

the market combined with its being at the development stage of

product- market evolution and its potential for being in a strong

competitive position make it a good candidate for receiving

more corporate resources.

Business unit B

It is somewhat similar to A. However, it has a relatively smallshare of the market given its strong competitive position. A

strategy would have to be developed to overcome this low

market share in order to justify more investments.


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Business unit C

It might be classified as a potential loser. A strategy must be

developed to overcome the low market share and weak

competitive position in order to justify future investments.

Business unit D

It is in a shakeout period, has a relatively large share of the

market, and is in a relatively strong position. Investment should

be made to maintain that position.


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Business units E and F

They have relatively large market share and has strong

competitive position. It should be used for cash generation.

Business unit G

It has low market share and weak competitive position. It

should be managed to generate cash in the short run, if

possible; however, the long-run strategy will more the likely be

divestment or liquidation.


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o Set objective and allocate resourceso Use of externally oriented datao Cash flow availability

o Graphical communication of business mixo Identify developing winnerso Illustrates distribution of business in an industryo Encourages promotion of competitive analysiso Selective earmarking of financial resourceso Reduce risks, increases concentration and

involvement in competitive world.


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o Difficulty in defining product/market segment.o Suggests impractical standard strategies.

o Naively following portfolio prescriptions mayreduce profit.

o No clear idea what makes an industry attractive.


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steconomice.uoradea.ro/anale/volume/2008/v4.../166.pdf


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THANK YOU

Hofers Cell Matrix

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