Comprehensive Strategy Formulation

Framework

Stage 1:
The Input Stage

Stage 2: Stage 3:
The Matching Stage The Decision Stage

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Strategy-Formulation Analytical Framework

Internal Factor Evaluation

Matrix (IFE)

External Factor Evaluation

Stage 1:
Matrix (EFE)
The Input Stage

Competitive Profile Matrix

(CPM)

3
 Strategy-Formulation Analytical Framework

SWOT Matrix

SPACE Matrix

Stage 2:
The Matching Stage BCG Matrix

IE Matrix

Grand Strategy Matrix

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 Comprehensive Strategy Formulation
Framework

Evaluating the
relative
Stage 3: attractiveness
The Decision Stage of the
alternative
strategies

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SWOT Matrix
 SWOT Matrix

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 Strategic Position and Action Evaluation (SPACE Factors)
Internal Strategic Position External Strategic Position
Financial Strength (FS) Stability Position (SP)
Return on investment Technological changes
Leverage Rate of inflation
Liquidity Demand variability
Working capital Price range of competing products
Cash flow Barriers to entry
Inventory Turnover Competitive pressure
Earnings per share Price elasticity of demand
Price earnings ratio Ease of exit from market
Competitive Advantage CA Industry Position (IP)
Market share Growth potential
Product quality Profit potential
Product life cycle Financial stability
Customer loyalty Technological know-how
Competition’s capacity utilization Resource utilization
Technological know-how Ease of entry into market
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Control over suppliers & distributors Productivity, capacity utilization
 SPACE Matrix
FP
+7
Conservative +6 Aggressive
+5
Market penetration Integration
Market development +4
Market penetration
Product development +3 Market Development
Related diversification +2 Product Development
+1 Diversification (Related or
Unrelated)
CP IP
-7 -6 -5 -4 -3 -2 -1 -1 +1 +2 +3 +4 +5 +6 +7

-2
Defensive -3 Competitive
Retrechment Integration
Divestiture -4 Market penetration
Liquidation -5 Market development
Product development
-6
9
-7 SP
 BCG Matrix
Relative Market Share Position
Low
High Medium 0.0
1.0 .50
High
+20
Industry Sales Growth Rate

Star
Stars Question Marks
II I
Medium
Question Mark
0

Cash Cows Dogs

Low
IIICow
Cash IV Dog
-20
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 GRAND STRATEGY MATRIX
RAPID MARKET GROWTH
Quadrant II Quadrant I
1. Market development 1. Market development
2. Market penetration 2. Market penetration
3. Product development 3. Product development
4. Horizontal integration 4. Forward integration
5. Divestiture 5. Backward integration
6. Liquidation 6. Horizontal integration
7. Concentric diversification STRONG
WEAK
COMPETITIVE COMPETITIVE
POSITION Quadrant III Quadrant IV POSITION
1. Retrenchment 1. Concentric diversification
2. Concentric diversification 2. Horizontal diversification
3. Horizontal diversification 3. Conglomerate
4. Conglomerate diversification
diversification 4. Joint ventures
5. Liquidation
SLOW MARKET GROWTH
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 Technique
in Decision
Stage

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 SIX STEPS REQUIRED TO DEVELOP A QSPM:
Step 1. Make a list of the organization’s external opportunities/threats and internal
strengths/weaknesses in the left column of the QSPM. Use the same EFE and IFE Matrices which
you already made and used in the SWOT.

Step 2. Assign weights to each key external and internal. These weights are the same to those in
the EFE and IFE matrices. Scores for each matrix should be also 1.0

Step 3. Identify alternative strategies from your SWOT that your organization is considering
implementing. Choose 3 and label them as strategy 1, strategy 2 and Strategy 3. Place AS
(Attractiveness Score) and TAS (Total Attractiveness Score below each strategy chosen.

Step 4. Determine the Attractiveness Score (AS) as determined by examining each key external
or internal factor, one at a time, and asking the Question: Does this factor affect the choice of
strategies made?” If the answer is yes the following scores shall be assigned: 1=not attractive,
2=somewhat attractive, 3=reasonably attractive and 4=highly attractive. If the answer is no, do not
assign a score and use a dash to indicate that the key factor does not affect the choice being
made.

Step 5. Compute the Total Attractiveness Score (TAS) by multiplying the weights (Step 2) by the
Attractiveness Scores (Step 4) in each row.

Step 6. Compute the Sum Total Attractiveness Score of each strategy. The highest sum total
indicates which strategy is the most attractive to pursue considering all relevant external and
Internal factors.
 QSPM Strategic Alternatives

Key External Factors Weight Strategy 1 Strategy 2 Strategy 3

AS TS AS TS AS TS

Same with
Same as your EFE Your EFE

Key Internal Factors

Same as your IFE Same with

Your IFE

SUM TOTAL ATTRACTIVENESS SCORE

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 Strategic Choice

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 The Strategy Clock:
Bowman’s Competitive strategy options
high

Differentiation
Perceived product:service benefits

4
Focused Differentiation
Hybrid 5
3

Low price 2 6

1 7 Strategies destined for

No frills ultimate failure
low
8
low high
19 Price
 The Strategy Clock:
Bowman’s Competitive strategy options
Strategy as a Portfolio of Real Options
By: T. Luehrman

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