Chapter 6 Strategy Analysis & Choice

Strategic Management: Concepts & Cases 13th Edition Fred David

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Ch 6 -1

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Ch 6 -2

Strategy Analysis & Choice

Whether its broke or not, fix it make it better. Not just products, but the whole company if necessary. Bill Saporito Life is full of lousy options. General P.X. Kelley

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Ch 6 -3

Strategy Analysis & Choice

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 possible

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Ch 6 -5

Comprehensive StrategyFormulation Framework

Stage 1 - Input Stage

EFE Matrix IFE matrix CPM

Stage 2 - Matching Stage

SWOT SPACE matrix BCG matrix IE Matrix Grand strategy matrix

QSPM
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Stage 3 - Decision Stage

Strategy-Formulation Framework
External Factor Evaluation Matrix (EFE)

Stage 1: The Input Stage

Internal Factor Evaluation Matrix (IFE)

Competitive Profile Matrix (CPM)

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Ch 6 -7

Stage 2: The Matching Stage

Match

between organizations internal resources & skills and the opportunities & risks created by its external factors

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Ch 6 -8

Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -9

Stage 2: The Matching Stage

SWOT Matrix
Strengths Weaknesses Opportunities Threats

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Ch 6 -10

SWOT Matrix
Four Types of Strategies
Strengths-Opportunities

(SO) (WO)

Weaknesses-Opportunities Strengths-Threats

(ST) (WT)

Weaknesses-Threats

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Ch 6 -11

SWOT Matrix

SO strategies use a firms internal strengths to take advantage of external opportunities WO strategies improve internal weaknesses by taking advantage of external opportunities ST strategies use a firms 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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Ch 6 -13

Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -14

SPACE Matrix
Strategic Position & Action Evaluation Matrix

Aggressive Conservative Defensive Competitive

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Ch 6 -15

SPACE Matrix

Internal dimensions

Financial position (FP) Competitive position (CP)

External dimensions

Environmental position (EP) Industry position (IP)

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Ch 6 -17

Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -18

BCG Matrix
Boston Consulting Group Matrix
Assists

multidivisional firm in formulating strategies

Autonomous Divisions Focus

divisions = business portfolio

may compete in different industries

on relative market-share position & industry growth rate

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BCG Matrix

Question Marks low relative market share in a high-growth industry Stars high relative market share in a highgrowth industry Cash Cows high relative market share in a low-growth industry Dogs Low relative market share in a slow or no growth industry
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Ch 6 -21

Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -22

The Internal-External Matrix

Positions an organizations 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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Ch 6 -23

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Ch 6 -24

IE Matrix

Based on two key dimensions

The IFE total weighted scores on the x-axis The EFE total weighted scores on the y-axis Grow and build Cells I, II, or IV Hold and maintain Cells III, V, or VII Harvest or divest Cells VI, VIII, or IX

Divided into three major regions

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Ch 6 -25

Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -26

Grand Strategy Matrix

Tool for formulating alternative strategies

Based on two dimensions

Competitive position

Market growth
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RAPID MARKET GROWTH

1. 2.

3.
4. 5. 6.

Quadrant II Market development Market penetration Product development Horizontal integration Divestiture Liquidation

1. 2.

3.
4. 5. 6. 7.

WEAK COMPETITIVE POSITION

1. 2. 3. 4. 5.

Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification Quadrant IV Related diversification Unrelated diversification Joint ventures

Quadrant III Retrenchment Related diversification Unrelated diversification Divestiture Liquidation

STRONG COMPETITIVE POSITION

1. 2. 3.

SLOW MARKET GROWTH

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Grand Strategy Matrix

Quadrant I

Excellent

strategic position

Concentration

on current markets/products
Take

risks aggressively when necessary

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Grand Strategy Matrix

Quadrant II
Evaluate How

present approach

to improve competitiveness
Rapid

market growth requires intensive strategy

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Grand Strategy Matrix

Quadrant III
Compete Weak

in slow-growth industries

competitive position changes quickly

Drastic Cost

& asset reduction (retrenchment)

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Grand Strategy Matrix

Quadrant IV
Strong

competitive position

Slow-growth

industry

Diversification

to more promising growth areas

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Strategy-Formulation Analytical Framework

Stage 3: The Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

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Ch 6 -33

QSPM
Quantitative Strategic Planning Matrix

Technique

designed to determine the relative attractiveness of feasible alternative actions

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Ch 6 -34

QSPM
Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/ Environmental Technological Competitive Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Management Information Systems Weight

Strategic Alternatives
Strategy 1 Strategy 2 Strategy 3

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Ch 6 -35

Steps to Develop a QSPM

Make a list of the firms key external opportunities/threats and internal strengths/weaknesses in the left column Assign weights to each key external and internal factor

1.

2.

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Ch 6 -36

Steps to Develop a QSPM

Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing Determine the Attractiveness Scores Compute the Total Attractiveness Scores Compute the Sum Total Attractiveness Score

3.

4. 5. 6.

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Ch 6 -37

QSPM
Advantages
Sets

of strategies considered simultaneously or sequentially

Integration

of pertinent external & internal factors in the decisionmaking process

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QSPM
Limitations

Requires

intuitive judgments & educated assumptions

Only

as good as the prerequisite

inputs

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Ch 6 -39

Cultural Aspects of Strategy Choice Organization Culture

A

set of values, beliefs, attitudes, customs, norms, personalities, heroes and heroines that describe a firm
Successful

strategies depend on support of the firms culture

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Politics of Strategy Choice

Politics in Organizations
Hierarchy

of command

Career

aspirations
of scarce resources

Allocation

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Ch 6 -41

Politics of Strategy Choice

Political Tactics for Strategists
Equifinality Satisfying Generalization Higher-order Political

issues

access on important issues

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Governance Issues
Board of Directors Roles & Responsibilities
Control

& oversight over management to legal prescriptions of stakeholders interests of stockholders rights
Ch 6 -43

Adherence

Consideration Advancement

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Ch 6 -44