Sector Matrix Analysis - Essay Example

?Running head: Sector Matrix Analysis Introduction In analyzing the supply demand and linkages of an organization, the production function usually describes the connection between the labor, inputs of land, the capital and the material used so that they can produce a certain and specific output for the firm. To construct the concept of a value chain, understanding the firm as a linear supply chain is very important. In addition to that, the industry should be analyzed as a collection of firm, which is used to do similar functions and produce a similar output. The collection of the firm that is the industry shares the same technology. Inside the value chain firms, the sectors are always competing in reducing their labor costs and cost of manufacture. In such a framework, sector matrix is important in analysis a business. Sector matrix analysis Sector matrix analysis is one of the frameworks that are useful in analyzing the demand and the supply linkages. To maintain the return on capital, most of the organizations usually struggle to reduce the cost of manufacturing process and to enhance the cost recovering technique. In sector matrix framework, the firm is usually viewed as one that consolidates al the income through a variety of activities that usually occur through the firm (Haslam et al. 2000). The objective of a sector matrix framework is to analyze the business and actually understand how a complex structure of supply and demand side can actually interrelate and shape the policy of the businesses responses. The side of the demand is very different when compared to Porter’s value chain strategy. In the matrix framework analysis, the household demands for the products, which are finished, are the ones of interest. In addition to that, all the products and services that are usually complementary and are substitutable are added to the list so that they can become part of consumption for the buyer. This form of analysis usually creates a matrix that consists of vertical and horizontal relations unlike the industry chain analysis. In using sector matrix framework, if the manager is to increase the output of the organization, then the organization must be in a position to satisfy the consumer with their products or services and given at a low cost. In the value chain analysis of Porter (1985), the production function is used to determine the output and the input of the organization. The product process is the combination of inputs to provide a specific output. The output here is either in terms of a service offered or in terms of the product (Williams et al. 1994). A matrix framework analysis is created based on some assumptions. Firstly, on the side of the demand, rather than limiting the expenditure on a product that is new by an individual customer, the definition of the term is expanded to also include all the expenditure of the household that include all the expenditure of the household. The other assumption that is used to create the sector matrix of analysis is broadening the definition of the supply side. The concept that is used here is to broaden the definition so that the financial range can consist of a variety of activities that should cut across all the sectors of the industry. This is unlike the value chain approach where the definition of a business is limited and is defined by a common product that uses a similar technology. At a national or regional level, the space that is defined in the motoring matrix is usually controlled by the demand of the household and firms from the motoring sector. This sector maintains the cost recovery from a variety of supply side duties. On the side of the supply, the cost recovery that is usually obtained sustains the organizations surpluses that are often reapplied to merge the activities, which occur within the industry sector and additionally across the industry sector. To explain sector matrix analysis, there are two examples that both used the sector matrix to sustain in the market. An instance is the European and Japanese nationally based car assemblers’ that market cars at home in comparison to the US markets where cars are sold at home. The US home car market reached maturity in 1978 a long time before the European and the Japanese reached maturity in the 1990 (Kay 1993). The US organization strategy emphasized in the downsizing the model replacement. In relation to that, they also used a slower rate in model replacement that was accompanied by the use of financial resources in the economy. However, when the European and the Japanese market reached maturity, they used the same organizational strategy since they discovered that economy could be a useful strategy. However, they did not acquire a lot of profit compared to their American counterparts. The use of sector matrix analysis can either be rewarding on not. Not all the organizations that have used the framework of the sector matrix have survived. The car business is a good example to illustrate whether the sector matrix analysis works perfectly well. It must be noted that the sector matrix analysis cannot be used in all sectors. One of the sectors that cannot use the sector matrix analysis is the health-care sector. This is because of the complexities that would be involved for instance in the locked demand. Motoring explains the sector matrix section very well because it is embedded. Motoring uses the mobility matrix. This is where if a motorist wants to keep his or her car in the road, then they must buy a combination of services that are offered. One point that is to be noted is that the general view of the sector matrix approach is that it gives out the possibility of the sector matrix moves to other organizations that gain their profits and sales from their tasks that are related to the existing tasks that are performed. A much higher share of the functional expenditures is hoped to be gained by an organization that already has access to the customers whether they are domestic or business customers (Gereffi 1996). In most of the cases that are experienced in the study of the sector matrix, the sector matrix moves its commencement and conclusion in relation to the margin, which can be high, or the price that is low. This is usually adjacent to the goods which have a higher price or a service of an organization which usually produces the main transactions and the retain football. An instance is the sale of electrical goods by the Circuit City of the US warranties are actually not much when compared to the bottled water that is usually in sale in most of the petrol stations. It can also be noted that the sector matrix analysis enables a focus on the complex moves of an organization. An example that can be given here is a consultancy firm that runs outsourced bank-office solutions. Many companies have used the sector matrix analysis and survived. However, before using sector matrix in any other company rather than the motoring industry, some factors should be understood clearly. Firstly, the sector matrix analysis does what it was designed to do in the first place. This was giving out a reason as to why the car industry has died down in manners that open up a new research about motoring. For instance, there has been a research as to the task and the contribution financially of the credit subsidiaries in Brazil for the automotive organizations. Consequently, another research was carried out exploring the manner in which regressive redistribution of wealth in France usually happens in when the profits that are made from the sale of the car parts is used to subside the buying price of new cars. Many companies are difficult to change by using the moves of the sector matrix as already illustrated (Juran 1993). Another example is the designer shoes that do not need any insurance or maintenance so that they can function effectively. It should also be noted that the success of one organization that has used the sector matrix method should not be used as a prediction of the success of other organization. An instance is the ford company that tried using the sector matrix method. Ford has made many lucrative and causative profits in the selling of the vehicle. However, in the car rental services, there has not been any notable contribution that the car rental services that has produced. It should also be noted that the organizations that apply the sector matrix analysis framework do not at times come up with the desired financial profits. Additionally, organizations that are pressurized to use the sector matrix moves do not all the time achieve the financial performance that they have desired. The outcome of the matrix move analysis is not the same and is at times disappointing. For instance is the Ford case that was illustrated. The ford case clearly illustrates that by increasing the credit subsidiaries buys additional cash and profit in the expense of the auxiliary firm (Monden 1994). However, complications, which are faced by the auxiliary firms, include instances such as there is a lower return that is experienced on the employed capital. In addition to that, the major development in the European cars business was because of the shift of the assemblers in volume who ventured in to the car finance sector. However, although it was at first predicted as a successful car business, this did not actually transform the profit that the European car assemblers made. According to the financial times, the estimated return of sales was to rise from the 3 percent to 6 percent (Haslam et al. 2000). The GE is an example of an organization that used the sector matrix analysis under the services sector and succeeded. The advantage that the GE was having is that it had obtained matrix positions that were large and quite profitable in several sectors. For instance, the GE was already having a strong sector in the aviation department. Aviation in comparison to motoring is quite a difficult task. Aviation involves a variety of suppliers and intermediaries so that it can deliver the final product to its destination. A similar factor that both the motoring and the aviation sector experience is that durables are included whether leased or owned. In addition to that, there is also a range of services to be done which are all required within an institutional framework that is regulated. In using the sector matrix analysis, GE is usually one of the world’s largest aero-engine manufacturers. In addition to that, it is also one of the largest providers of aero-engine manufacturers. The reason as to why the GE succeeded is mainly because it is involved in four different sectors (Froud et al. 2006). Conclusion As seen sector matrix analysis is one of the frameworks that are useful in analyzing the demand and the supply linkages. To maintain the return on capital, most of the organizations usually struggle to reduce the cost of manufacturing process and to enhance the cost recovering technique. In sector matrix framework, the firm is usually viewed as one that consolidates al the income through a variety of activities that usually occur through the firm. It should be noted that the sector matrix analysis does not work in all organizations that apply it. An instance is the ford company that tried using the sector matrix method. Ford has made many lucrative and causative profits in the selling of the vehicle. However, in the car rental services, there has not been any notable contribution that the car rental services that has produced. The GE is an example of an organization that used the sector matrix analysis under the services sector and was successful. The advantage that the GE was having is that it had obtained matrix positions that were large and quite profitable in several sectors. In applying the sector matrix analysis, one should be ready to face the losses in case any should occur. References Froud J. et al. 2006. Financialization and strategy: narrative and numbers, New York: Taylor & Francis. Gereffi, G. 1996. Global Commodity Chains: New Forms of Coordination and Control Among Nations and Firms in International Industries. Competition and Change. Vol 4. Haslam C., Neale A., & Johal S. 2000. Economics in a business context. UK: Cengage Learning EMEA. Juran, J. M. 1993. Quality Planning and Analysis: From Product Development Through Use, New York, McGraw-Hill. Kay, J. 1993. Foundations of Corporate Success, Oxford: OUP Monden, Y. 1994. The Toyota Production System. Peoria, GA: Industrial Engineering and Management Press. Porter, M. 1985. Competitive Advantage, New York: Free Press. Williams, K et al.1994. Cars: Analysis, History, Cases, Oxford: Berghanan Books. Read More