The ADL matrix was developed by Arthur D.Little and it has a common ground with the Product Life Cycle model. In order to gain an better understanding of a firm’s competitive position, Arthur has put forward the ADL matrix which is a management approach that examines the company upon two dimensions; the competitive position and the industry maturity.
Competitive position is an indicator of the company strengths and according to the ADL matrix it can be categorized as:
Dominant: This is a rare position and not sustainable over the long-term. This is usually triggered by a monopoly or a protected technology leadership
Strong: In this case the share of market is strong and not affected by competitor’s actions. The firm enjoys a significant degree of freedom for the strategy to be followed.
Favorable: Here the industry is fragmented and there is no clear leader. The firm enjoys competitive advantage in particular segments.
Tenable: Competitive advantage in this position is based on a niche, either location-based or product-based.
Weak: Business is too small and experiences constant loss of market share.
Industrial Maturity is an indicator of the maturity of the product and can be categorized to four categories:
Embryonic: This stage is all about the introduction of the product to the market and it is characterized by a rapid growth rate, high investment, limited competitors and high prices
Growth: Here there are only a few competitors and the market keeps following a rapid growth rate. The sales start to increase.
Maturity: The next stage is characterized by stable market shares, a loyal customer base and a growing competition.
Ageing: The last stage is when the demand starts to follow a downward trend line an firms are exiting the market.
The ADL matrix: Implementation
1. The first step is to identify the phases of industrial maturity for each Strategic Business Unit of your company.
2. Then you will need to assess the competitive position of each Strategic Business Unit.
3. Plot the positions of each SBU on the ADL matrix.
The process is very simple and straightforward. For instance, according to the ADL matrix if you have a newly introduced product at an Embryonic stage and a strong competitive position, then you will need to push for share and improve the position. On the contrary, if you have a long-established product at an Ageing phase and a tenable competitive position, then it is advise to exit the market as there are not opportunities for growth.
As with any model, the ADL matrix carries some limitations. The most important are:
1. The life cycle of a product does not have a standard duration. For some products it’s very short while for others it can last for years. The length of the life cycle can also be influence by various factors, including competitors.
2. Identifying the competitive position of a firm may be subjective.