1. Chapter 6 Strategy Analysis & Choice
Strategic Management: Concepts & Cases
13th Edition
Fred David
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3. Strategy Analysis & Choice
“Whether it’s 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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4. 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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5. Strategy Analysis & Choice
Generating Alternatives –
Participation in generating alternative strategies should be as broad as possible
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6. 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
QSPM
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7. 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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8. 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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9. Stage 2: The Matching Stage
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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10. Stage 2: The Matching Stage
SWOT Matrix
Strengths
Weaknesses
Opportunities
Threats
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11. SWOT Matrix Four Types of Strategies Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)
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12. SWOT Matrix
SO strategies use a firm’s internal strengths to take advantage of external opportunities
WO strategies improve internal weaknesses by taking advantage of external opportunities
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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13. 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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14. Stage 2: The Matching Stage
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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15. SPACE Matrix Aggressive Conservative Defensive Competitive
Strategic Position & Action Evaluation Matrix
Aggressive
Conservative
Defensive
Competitive
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16. SPACE Matrix Internal dimensions External dimensions
Financial position (FP)
Competitive position (CP)
External dimensions
Environmental position (EP)
Industry position (IP)
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18. Stage 2: The Matching Stage
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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19. Boston Consulting Group Matrix
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 & industry growth rate
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20. BCG Matrix
Question Marks – low relative market share in a high-growth industry
Stars – high relative market share in a high-growth 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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22. Stage 2: The Matching Stage
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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23. 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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25. IE Matrix Based on two key dimensions Divided into three major regions
The IFE total weighted scores on the x-axis
The EFE total weighted scores on the y-axis
Divided into three major regions
Grow and build – Cells I, II, or IV
Hold and maintain – Cells III, V, or VII
Harvest or divest – Cells VI, VIII, or IX
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26. Stage 2: The Matching Stage
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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27. Tool for formulating alternative strategies Based on two dimensions
Grand Strategy Matrix
Tool for formulating alternative strategies
Based on two dimensions
Competitive position
Market growth
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28. RAPID MARKET GROWTH Quadrant II Market development Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
Quadrant I
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Related diversification
WEAK
COMPETITIVE
POSITION
STRONG
COMPETITIVE
POSITION
Quadrant III
Retrenchment
Related diversification
Unrelated diversification
Divestiture
Liquidation
Quadrant IV
Related diversification
Unrelated diversification
Joint ventures
SLOW MARKET GROWTH
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29. Excellent strategic position Concentration on current markets/products
Grand Strategy Matrix
Quadrant I
Excellent strategic position
Concentration on current markets/products
Take risks aggressively when necessary
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30. Evaluate present approach How to improve competitiveness
Grand Strategy Matrix
Quadrant II
Evaluate present approach
How to improve competitiveness
Rapid market growth requires intensive strategy
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31. Compete in slow-growth industries Weak competitive position
Grand Strategy Matrix
Quadrant III
Compete in slow-growth industries
Weak competitive position
Drastic changes quickly
Cost & asset reduction (retrenchment)
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32. Strong competitive position Slow-growth industry
Grand Strategy Matrix
Quadrant IV
Strong competitive position
Slow-growth industry
Diversification to more promising growth areas
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33. Stage 3: The Decision Stage
Strategy-Formulation Analytical Framework
Quantitative Strategic Planning Matrix (QSPM)
Stage 3: The Decision Stage
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34. Quantitative Strategic Planning Matrix
QSPM
Quantitative Strategic Planning Matrix
Technique designed to determine the relative attractiveness of feasible alternative actions
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35. Strategic Alternatives
QSPM
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Management Information Systems
Strategy 3
Strategy 2
Strategy 1
Weight
Key External Factors
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/Environmental
Technological
Competitive
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36. Steps to Develop a QSPM
Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column
Assign weights to each key external and internal factor
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37. 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
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38. Sets of strategies considered simultaneously or sequentially
QSPM
Advantages
Sets of strategies considered simultaneously or sequentially
Integration of pertinent external & internal factors in the decision-making process
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39. Requires intuitive judgments & educated assumptions
QSPM
Limitations
Requires intuitive judgments & educated assumptions
Only as good as the prerequisite inputs
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40. 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 firm’s culture
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41. Politics of Strategy Choice
Politics in Organizations
Hierarchy of command
Career aspirations
Allocation of scarce resources
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42. Politics of Strategy Choice
Political Tactics for Strategists
Equifinality
Satisfying
Generalization
Higher-order issues
Political access on important issues
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43. Control & oversight over management Adherence to legal prescriptions
Governance Issues
Board of Directors Roles & Responsibilities
Control & oversight over management
Adherence to legal prescriptions
Consideration of stakeholders’ interests
Advancement of stockholders’ rights
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44. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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