1. Copyright 2005 Prentice Hall
Bus 411
Day 12
Copyright 2005 Prentice Hall

2. Agenda Assignment 4 Due Assignment 5 Handouts Mid-term exam
Also sent in WebCT
Due March 9
Mid-term exam
March 13-16
Take home (non-group work)
20-25 Short essays
Intense-- ~10 hours
Finish Discussion of Strategy Analysis & Choice
Mach test (not graded)
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3. Timeline Copyright 2007 Prentice Hall March 6 March 9 March 13
Chapter 7
Determine team assignments (3 teams, 4 Case Studies each )
March 9
Chapter 8
Assignment 5 due
March 13
Chapter 9
Mid-term assigned
March 16
How to present a case study
Mid-term due
Tony Case study One Apple Computer
March 20
Team 1 Case Study Two Dell Computer
March 23
Team 2 Case Study Three PepsiCo
March Spring Break
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4. Stage 2: The Matching Stage
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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5. 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
IFE and EFE for EACH division
Strategic implications of each matrix are different
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6. Copyright 2007 Prentice Hall

7. 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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8. Steps to Create an IE matrix
Use Excel’s Chart Wizard
To make Pies
For each division in the organization
Construct an IFE matrix and record score
Construct an EFE matrix and record score
Creates an circular “Pie” for each division
Percentage of Corporate Revenues generated by division
Size of circle
Percentage of Corporate Profits generated by division
Size of pie slice
Place each divisional “pie” in IE matrix based on
EFE score – y axis
IFE score – x axis
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9. Copyright 2007 Prentice Hall

10. IE Matrix I II III IV V VI VII VIII IX Grow and Build
Hold and Maintain
Harvest or Divest
IFE Scores
Strong Average Weak I II
III IV V VI
VII
VIII IX
High
3-4
Medium
2-2.99
Low
1-1.99 2
Scores
EFE 3 1
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11. Stage 2: The Matching Stage
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
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12. Grand Strategy Matrix Tool for formulating alternative strategies
Based on two dimensions
Competitive position
Market growth
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13. 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
Concentric diversification
WEAK
COMPETITIVE
POSITION
STRONG
COMPETITIVE
POSITION
Quadrant III
Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate diversification
Liquidation
Quadrant IV
Concentric diversification
Horizontal diversification
Conglomerate diversification
Joint ventures
SLOW MARKET GROWTH
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14. Grand Strategy Matrix Quadrant I Excellent strategic position
Concentration on current markets/products
Take risks aggressively when necessary
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15. Grand Strategy Matrix Quadrant II Evaluate present approach
How to improve competitiveness
Rapid market growth requires intensive strategy
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16. Grand Strategy Matrix Quadrant III Compete in slow-growth industries
Weak competitive position
Drastic changes quickly
Cost & asset reduction (retrenchment)
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17. Grand Strategy Matrix Quadrant IV Strong competitive position
Slow-growth industry
Diversification to more promising growth areas
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18. Strategy-Formulation Analytical Framework
Quantitative Strategic Planning Matrix (QSPM)
Stage 3: The Decision Stage
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19. QSPM Quantitative Strategic Planning Matrix
Technique designed to determine the relative attractiveness of feasible alternative actions
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20. Strategic Alternatives
QSPM
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Computer 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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21. 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 (should be the same you used from IFE and EFE matrices)
Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing
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22. Steps to Develop a QSPM Determine the Attractiveness Scores
Compare the Total Attractiveness Scores
Compute the Sum Total Attractiveness Score
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23. Six steps to developing a QSPM:
Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM.
From SWOT, IFE and EFE
Assign weights to each key external and internal factor.
Weights for each category should add up to one.
Same as IFE and EFE
Examine the Stage 2 matrices and identify alternative strategies that the organization should consider implementing.
Determine the Attractiveness Scores (AS). (1-4)
1=not attractive
4=highly attractive
Compute the total AS.
Weight * AS
Compute the sum Total AS.
Range should be from 2-8
templates\QSPM_Matrix.xlt
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24. QSPM Limitations Requires intuitive judgments & educated assumptions
Only as good as the prerequisite inputs
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25. QSPM
Advantages
Sets of strategies considered simultaneously or sequentially
Integration of pertinent external & internal factors in the decision making process
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26. Cultural Aspects of Strategy Choice
Organization Culture
Successful strategies depend on the degree of consistency with the firm’s culture
Mach Test
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27. Politics of Strategy Choice
Politics in Organizations
Management hierarchy
Career aspirations
Allocation of scarce resources
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28. Successful Strategists :
Were found to let weakly supported ideas and proposals die through inaction and to establish additional hurdles or tests for strongly supported ideas considered unacceptable but not openly opposed.
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29. Politics of Strategy Choice
Political tactics for strategists
Equifinality
Same outcomes by different means
Satisfying
Good results with acceptable strategy is better than excellent results with an unpopular strategy
Generalization
Less detail
Higher-order issues
Take care of the big stuff first
Political access on important issues for Middle Managers
Agency and political avenues for redress
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30. Governance Issues
Board of Directors (advisors) Roles & Responsibilities
Control & oversight over management
Adherence to legal prescriptions
Consideration of stakeholder interests
Advancement of stockholder rights
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31. Corporate Governance Issues
Business Week’s “Principles of Good Governance”
No more than 2 directors are current or former company
executives
2. No directors do business with the company
3. Audit, compensation, and nominating committees made up of outside directors
4. Each director owns a large equity stake in the company
5. At least one outside director with extensive experience
6. Fully employed directors sit on no more than 4 boards –
Retirees on no more than 7
7. Each director attends at lest 75% of all meetings
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32. Corporate Governance Issues
Business Week’s “principles of good governance”
8. Board meets regularly without management present
9. Audit committee meets at least four times a year
10. Board is frugal on executive pay, diligent in CEO succession, and prompt to act when trouble arises
11. CEO is not also the Chairperson of the Board
12. Shareholders have considerable power and information to choose & replace directors
13. Stock options are considered a corporate expense
14. No interlocking directorships
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