David Sm13 Ppt 06

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Chapter 6 Strategy Analysis & Choice

Strategic Management:

Concepts & Cases

13 th

_Edition

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“Whether it’s broke or not, fix it – make it

better. Not just products, but the whole

company if necessary.”

– Bill Saporito

Strategy Analysis & Choice

“Life is full of lousy options.”

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

Subjective decisions based on objective

information



Generating alternative strategies



Selecting strategies to pursue



Best alternative course of action to

achieve mission & objectives



Derived from vision, mission, objectives,

external audit, and internal audit

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Strategy Analysis & Choice

Generating Alternatives

–

Participation in generating alternative

strategies should be as broad as

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Comprehensive

Strategy-Formulation Framework



Stage 1 - Input Stage



EFE Matrix



IFE matrix



CPM



Stage 2 - Matching Stage



SWOT



SPACE matrix



BCG matrix



IE Matrix



Grand strategy matrix



Stage 3 - Decision Stage

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Strategy-Formulation Framework

External Factor Evaluation

Matrix (EFE)

Internal Factor Evaluation

Matrix (IFE)

Competitive Profile Matrix

Stage 1:

The Input Stage

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Stage 2: The Matching Stage



Match between organization’s internal

resources & skills and the opportunities &

risks created by its external factors

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Strategy-Formulation Framework

SWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Stage 2:

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Stage 2: The Matching Stage



Strengths



Weaknesses



Opportunities



Threats

SWOT Matrix

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SWOT Matrix



Strengths-Opportunities (SO)



Weaknesses-Opportunities (WO)

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Strengths-Threats (ST)



Weaknesses-Threats (WT)

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SWOT Matrix



SO

strategies use a firm’s internal strengths

to take advantage of external opportunities

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WO strategies improve internal weaknesses

by taking advantage of external opportunities

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ST

strategies use a firm’s strengths to avoid

or reduce the impact of external threats



WT strategies defensive tactics aimed at

reducing internal weakness and avoiding

external threats

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Limitations with SWOT Matrix



Does not show how to achieve a competitive

advantage



Provides a static assessment in time



May lead the firm to overemphasize a single

internal or external factor in formulating

strategies

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Strategy-Formulation Framework

SWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:

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SPACE Matrix

Strategic Position & Action Evaluation Matrix

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Aggressive



Conservative



Defensive

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SPACE Matrix

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Internal dimensions



Financial position (FP)



Competitive position (CP)



External dimensions



Environmental position (EP)

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Strategy-Formulation Framework

SWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:

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BCG Matrix

Boston Consulting Group Matrix



Assists multidivisional firm in formulating

strategies



Autonomous divisions = business portfolio



Divisions may compete in different industries



Focus on relative market-share position &

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BCG Matrix



Question Marks – low relative market share

in a high-growth industry



Stars – high relative market share in a

high-growth industry

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Cash Cows – high relative market share in a

low-growth industry

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Dogs – Low relative market share in a slow or

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Strategy-Formulation Framework

SWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:

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The Internal-External Matrix



Positions an organization’s various divisions

in a nine-cell display



Similar to BCG Matrix except the IE Matrix:



Requires more information about the divisions



Strategic implications of each matrix are different

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IE Matrix

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Based on two key dimensions

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The IFE total weighted scores on the x-axis

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The EFE total weighted scores on the y-axis

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Divided into three major regions

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Grow and build – Cells I, II, or IV

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Hold and maintain – Cells III, V, or VII



Harvest or divest – Cells VI, VIII, or IX

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Strategy-Formulation Framework

SWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:

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Grand Strategy Matrix



Tool for formulating alternative

strategies



Based on two dimensions

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Quadrant IV

1.

Related diversification

2.

Unrelated diversification

3.

Joint ventures

Quadrant III

1.

Retrenchment

2.

Related diversification

3.

Unrelated diversification

4.

Divestiture

5.

Liquidation

Quadrant I

1.

Market development

2.

Market penetration

3.

Product development

4.

Forward integration

5.

Backward integration

6.

Horizontal integration

7.

Related diversification

Quadrant II

1.

Market development

2.

Market penetration

3.

Product development

4.

Horizontal integration

5.

Divestiture

6.

Liquidation

RAPID MARKET GROWTH

WEAK

COMPETITIVE

POSITION

STRONG

COMPETITIVE

POSITION

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Grand Strategy Matrix



Excellent strategic position



Concentration on current

markets/products



Take risks aggressively when

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Grand Strategy Matrix



Evaluate present approach



How to improve

competitiveness



Rapid market growth requires

intensive strategy

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Grand Strategy Matrix

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Compete in slow-growth industries

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Weak competitive position

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Drastic changes quickly

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Cost & asset reduction

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Grand Strategy Matrix

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Strong competitive position

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Slow-growth industry

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Diversification to more

promising growth areas

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Strategy-Formulation Analytical

Framework

Stage 3:

The Decision Stage

Quantitative Strategic

Planning Matrix

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QSPM



Technique designed to determine

the relative attractiveness of feasible

alternative actions

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QSPM

Key Internal Factors

Management

Marketing

Finance/Accounting

Production/Operations

Research and Development

Strategy 3

Strategy 2

Strategy 1

Weight

Key External Factors

Economy

Political/Legal/Governmental

Social/Cultural/Demographic/

Environmental

Technological

Competitive

Strategic Alternatives

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Steps to Develop a QSPM

1. Make a list of the firm’s key external

opportunities/threats and internal

strengths/weaknesses in the left column

2. Assign weights to each key external and

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Steps to Develop a QSPM

3. Examine the Stage 2 (matching) matrices,

and identify alternative strategies that the

organization should consider implementing

4. Determine the Attractiveness Scores

5. Compute the Total Attractiveness Scores

6. Compute the Sum Total Attractiveness

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QSPM



Sets of strategies considered

simultaneously or sequentially



Integration of pertinent external &

internal factors in the

decision-making process

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QSPM



Requires intuitive judgments &

educated assumptions



Only as good as the prerequisite

inputs

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Cultural Aspects of Strategy

Choice



A set of values, beliefs, attitudes,

customs, norms, personalities,

heroes and heroines that describe a

firm



Successful strategies depend on

support of the firm’s culture

Organization Culture

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Politics of Strategy Choice

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Hierarchy of command

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Career aspirations

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Allocation of scarce resources

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Politics of Strategy Choice

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Equifinality

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Satisfying

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Generalization

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Higher-order issues

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Political access

on important issues

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Governance Issues

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Control & oversight over management

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Adherence to legal prescriptions

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Consideration of stakeholders’ interests



Advancement of stockholders’ rights

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