Critically examine how a ‘sector matrix’ framework is useful for analysing demand and supply linkages. Use two contrasting examples.
From Industry Value Chain to Sector Matrix
Introduction
Deviating from the industry value chain first introduced by Porter (1985) and later adapted by Gereffi (1996), a fairly recent alternative has been established by Froud, Haslam, Johal & Williams (1998) called the ‘sector matrix’. Until about a decade ago competitive focus was on the production process, the steps taken to develop a product being the ‘primary’ activities and company strategies outlined as ‘support’ activities. With continually increasing complexity within corporations, new and more innovative means of analysis are required. A…show more content… Figure 3: Froud et al’s Sector Matrix, c. 1998
“The objective of a matrix form of business analysis is to understand how a more complex web of demand and supply side relations interact and shape business policy responses” (ibid). Differentiating itself from the industry chain, sector matrix is a structured interlacing of horizontal and vertical linkages. It also carries a different perception of the end user- instead of considering customers a single entity which consumes the product ‘alone’ as does the value chain, sector matrix regards one purchase as contributing to an entire household (Froud et al, 1998).
Supply and demand sides exist, as supply interaction and demand substitution (ibid) but emphasis lies with the latter. Demand substitutions usually come from within the same sector but their common point is that they require services or servicing post-sale, which is why motoring or service providers make for such good sectors of analysis. Suppliers in a matrix can include a multitude of businesses, which may or may not have varying technologies, since sector matrix analysis is not tied down to one industry. Matrices can be a more rewarding system for strategic analysis than the value chain since it has the ability provide a more abstract view, that does not blatantly direct to a solution which may not be the best route for the company to take. Further, it is not implied “that
