9 Robert Uberman, Multinational Corporations (MNCs)

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Robert Uberman, Multinational Corporations (MNCs)


The The ADLADL model model – – a successful attempt to a successful attempt to find a balance between thefind a balance between the BCG a BCG andnd McKinsey/GEMcKinsey/GE approaches approaches

• Based on well established product development model – the product life-cycle one

• Yet, defining certain guidelines in establishing competitive position of business segments

• Including market growth and relative market share measures in a list of possible indicators

• (Max, Hajluf pp. 280-281)


TheThe ADL ADL model model – – product life-cycle conceptproduct life-cycle concept (1)(1)

Personal vehicles

Solar energy Specialized tourism

Office software

Genetics Bicycles

Coal (USA)

Embryonic Growth Maturity Decline


ADL Model– Product life cycleADL Model– Product life cycle concept concept (2) – (2) – Evolution of key economic parameters Evolution of key economic parameters

-20

0

20

40

60

SalesProfitCash flow


ADLADL model model – – the competitiveness/product the competitiveness/product life cycle matrixlife cycle matrix

Source: Hax, Majluf, ”Strategic Management”, p. 198, adapted

Dom

inan

t Natural growth Natural growth Natural growth Natural growth

Stro

ng Natural growth Natural growth Natural growth Selective growth

Favo

rabl

e Natural growth Natural growth Selective growth Hold position or withdraw

Tena

ble Natural growth Selective growth Hold position or

withdrawHold position or withdraw

Wea

k

Selective growth Hold position or withdraw

Hold position or withdraw

Divest

Embryonic Growth Maturity Decline

Com

petit

ive

posi

tion

Industry life cycle stage


ADLADL Model Model – – recommended strategy thrust recommended strategy thrust ((selectionselection))

Natural Natural growthgrowth

Selective Selective growthgrowth

Hold position Hold position or withdrawor withdraw

DivestDivest

Grow with the industry

Find niche Keep up with leaders

Sell out

Build slowly market share

Hold niche Renew offer Dissolve

Build aggressively market share

Exploit niche Hold position

Hold position

Each of the strategies prescribed is presented in the model


ADLADL model model – – an example of specific an example of specific recommendationsrecommendations: : natural growthnatural growth – – hold hold positionposition

• Keep traditional offer and markets• Backward integration• Process re-engineering• Conventional cost cutting• Cost efficiency oriented R&D• Outsourcing


ADLADL model - critics model - critics

• Common to the critique of the life cycle approach

• 4 Porter’s claims:– length of life cycle phases may vary

substantially from industry to industry,– sometimes industries’ development don’t

follow the model, – MNCs may influence product life cycle (f.e.

delaying introduction of new products)– competition may develop differently then

assumed in the ADL model.

Portfolio approach to a strategy Portfolio approach to a strategy formulation – conclusions – criticsformulation – conclusions – critics

• Critic of the balanced portfolio approach:– MNCs shall not be treated as a dynamic set

of diversified businesses – there must be an unifying factor

– preposition of maintaining a balanced portfolio lead to a wave of unjustified mergers and acquisitions

– preposition of maintaining a balanced portfolio lead to disregarding potentially profitable projects


9 Robert Uberman, Multinational Corporations (MNCs)

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