The horizontal axis of the model (GDP/LC Matrix) depicts the stages in the industry life cycle. It is based on the Arthur D Little's (ADL) matrix, where it recognizes four stages of development (Development, Growth, Maturity and Decline). In addition, the advisable strategies for each sector-Maintenance/Abandon, Reorientation and Development are founded on Arthur D Little's findings. However, when calculating the growth rate and other indicators, statistics from five preceding years should be used in order to obtain reliable results. The author suggests calculating accumulated growth for the years in consideration and finding the slope coefficient, which is the indicator of the growth rate. In order to avoid absolute numbers, the author uses relative growth rate, which is obtained by dividing the growth rate of the particular industry by the largest growth rate. Thus, the industry with the highest growth indicator is denoted as the benchmark for the other industries and is equal to `1'.
The vertical axis of the model (relative part in GDP) reflects the industry or sector's contribution to the state economy. Gross Domestic Product (GDP) is one of the main economic indicators which the countries use to measure their wealth, and therefore, the vertical axis shows the share of wealth the sector generates. Similarly, to the horizontal axis, the author avoids absolute numbers and relative part in GDP is used instead. It is calculated by dividing the percentage of the particular industry's contribution by the contribution of the largest industry. Correspondingly, the largest industry is denoted as the benchmark for the other industries and is equal to `1'. The profit margin is an additional asset of the model. As profit is one of the aims of business, it is essential to include it in the model. It is expressed as the percentage of profit after taxes from the net turnover. The margin allows the user to see immediately the most profitable and unprofitable sectors of the economy.
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