1. Ch 6 -1 Chapter 6 Strategy Analysis & Choice

2. Ch 6 -2 -- Establishing long-term objectives -- Generating alternative strategies -- Selecting strategies to pursue -- Best alternative - achieve mission & objectives Nature of Strategy Analysis & Choice Strategy Analysis & Choice

3. Ch 6 -3 Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: The Matching Stage Stage 3: The Decision Stage

4. Ch 6 -4 Strategy-Formulation Analytical Framework Internal Factor Evaluation Matrix (IFE) External Factor Evaluation Matrix (EFE) Competitive Profile Matrix (CPM) Stage 1: The Input Stage

5. Ch 6 -5 Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

6. Ch 6 -6 SWOT Matrix  Strengths-Opportunities (SO)  Weaknesses-Opportunities (WO)  Strengths-Threats (ST)  Weaknesses-Threats (WT) Four Types of Strategies

7. Ch 6 -7 SO Strategies Use a firm’s internal strengths to take advantage of external opportunities SO Strategies Strengths Weaknesses Opportunities Threats SWOT

8. Ch 6 -8 WO Strategies Improving internal weaknesses by taking advantage of external opportunities WO Strategies Strengths Weaknesses Opportunities Threats SWOT

9. Ch 6 -9 ST Strategies Use a firm’s strengths to avoid or reduce the impact of external threats ST Strategies Strengths Weaknesses Opportunities Threats SWOT

10. Ch 6 -10 WT Strategies Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats WT Strategies Strengths Weaknesses Opportunities Threats SWOT

11. Ch 6 -11 SWOT Matrix Leave Blank Strengths – S List Strengths Weaknesses – W List Weaknesses Opportunities – O List Opportunities SO Strategies Use strengths to take advantage of opportunities WO Strategies Overcoming weaknesses by taking advantage of opportunities Threats – T List Threats ST Strategies Use strengths to avoid threats WT Strategies Minimize weaknesses and avoid threats

12. Ch 6 -12 Develop a new employee benefits package = Strong union activity (threat) + Poor employee morale (weakness) Develop new products for older adults = Decreasing numbers of young adults (threat) +Strong R&D (strength) Pursue horizontal integration by buying competitor's facilities = Exit of two major foreign competitors form the industry (opportunity) + Insufficient capacity (weakness) Acquire Cellfone, Inc.= 20% annual growth in the cell phone industry (opportunity) + Excess working capacity (strength) Key Internal FactorKey External FactorResultant Strategy Matching Key Factors to Formulate Alternative Strategies

13. Ch 6 -13 SPACE Factors Environmental Stability (ES) Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry Competitive pressure Price elasticity of demand Ease of exit from market Risk involved in business Financial Strength (FS) Return on investment Leverage Liquidity Working capital Cash flow External Strategic PositionInternal Strategic Position

14. Ch 6 -14 SPACE Factors Industry Strength (IS) Growth potential Profit potential Financial stability Technological know-how Resource utilization Ease of entry into market Productivity, capacity utilization Competitive Advantage CA Market share Product quality Product life cycle Customer loyalty Competition’s capacity utilization Technological know-how Control over suppliers & distributors External Strategic PositionInternal Strategic Position

15. Ch 6 -15 SPACE Matrix FS +6 +1 +5 +4 +3 +2 -6 -5 -4 -3 -2 -6-5-4-3-2+1+2+3+4+5+6 ES CAIS ConservativeAggressive DefensiveCompetitive

16. Ch 6 -16 BCG Matrix Dogs IV Cash Cows III Question Marks I Stars II Relative Market Share Position High 1.0 Medium.50 Low 0.0 Industry Sales Growth Rate High +20 Low -20 Medium 0

17. Ch 6 -17 Quadrant IV 1. Concentric diversification 2. Horizontal diversification 3. Conglomerate diversification 4. Joint ventures Quadrant III 1. Retrenchment 2. Concentric diversification 3. Horizontal diversification 4. Conglomerate diversification 5. Liquidation Quadrant I 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Concentric diversification Quadrant II 1. Market development 2. Market penetration 3. Product development 4. Horizontal integration 5. Divestiture 6. Liquidation RAPID MARKET GROWTH SLOW MARKET GROWTH WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION

18. Ch 6 -18 Strategy-Formulation Analytical Framework Stage 3: The Decision Stage Quantitative Strategic Planning Matrix (QSPM)

19. Ch 6 -19 QSPM Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems Strategy 3Strategy 2Strategy 1WeightKey External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/ Environmental Technological Competitive Strategic Alternatives

20. Ch 6 -20 Corporate Governance Issues 1.No more than 2 directors 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 attends at lest 75% of all meetings 5.Audit committee meets at least four times a year 6.CEO is not also the Chairperson of the Board 7.Shareholders have considerable power and information to choose & replace directors 8.Stock options are considered a corporate expense 9.No interlocking directorships Business Week’s “principles of good governance”