A new competitive analysis tool: the relative profitability and growth matrix

Abstract

PurposeThe purpose of this paper is to introduce the relative profitability and growth matrix and to demonstrate its use as a competitive analysis tool.Design/methodology/approachTwo well‐known drivers of value are profitability and growth. After a study of 2 × 2 matrices we applied these drivers on a relative or industry comparative basis to a 2 × 2 matrix, and then we applied that matrix to competitive analyses of two industries to assess its strategic utility.FindingsOur findings suggest that the relative profitability and growth matrix could be a useful competitive analysis screening and communications tool.Practical and research implicationsThe relative profitability and growth matrix assesses a firm's profitability and growth relative to its industry and by so doing helps to identify and classify performance in a succinct format that facilitates further analysis. After such analysis has been completed the matrix can also serve as a convenient tool to communicate the analytical findings.Originality/valueThe relative profitability and growth matrix is a value‐driver based 2 × 2 matrix, the strategic utility of which is demonstrated and explained in two examples.

Digitalization and corporate transformation: The case of European oil & gas firms

“…Selecting the right dimension for the matrixes' variables is the first and foremost step in the matrix creation process (Lowy, & Hood, 2010). Since we had already identified the four critical dimensions, our next step was to identify the most suitable combination of axis variables to use, following the approach carried out in other studies (e.g., Calandro & Lane, 2007). Given the existence and usage of multiple 2x2 matrixes, we opted to develop two 2x2 matrixes to fit these four critical dimensions.…”

La gestión de la Cartera Corporativa en la práctica: el caso de Credit Suisse

“…From then onwards, a range of two-by-two matrix developed; for instance, "the relative profitability and growth matrix" (Calandro & Lane, 2007) or the Pidun matrix, plotting strategic potential against financial potential (Pidun, 2019). While there were differences with regards to the measures and metrics used, there were two basic types of approaches: those, like the BCG-matrix, that relied on a single numerical metric along each axis, and those, like the GE/McKinsey matrix, that used a combination of qualitative and quantitative measures, with different weightings to arrive at a numerical score (Pidun et al, 2011).…”

“…Credit Suisse used these four lenses to evaluate its portfolio and design its strategy. Its approach, although adapted to the characteristics of the financial services sector was not dissimilar to that developed by Calandro & Lane (2007), which, while designed to analyze industrial performance as opposed to business unit performance, is centered around relative growth and relative profitability. Most companies use traditional criteria such as market attractiveness, competitive position and value-creation, as criteria for the evaluation of Strategic Business Units (Pidun et al, 2011), and Credit Suisse was no different in this respect.…”

Avaliação das equipes de vendas de duas empresas com a matriz BCG utilizando lucro e margem de contribuição

“…In accordance with Calandro & Lane (2007), the BCG matrix is much used in the insurance industry where helps senior executives to identify the most potential market segments and, so, define resource allocation to bring the greatest possible return. The BCG matrix has already been used for other purposes besides analyzing the product portfolio.…”