Chapter 7
Strategy Analysis and Selecting
Content
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Introduction of strategy analysis
Types of strategies analysis
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SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Conclusion
Introduction
Nature of Strategy Analysis & Choice
-- Establishing long-term objectives
-- Generating alternative strategies
-- Selecting strategies to pursue
-- Best alternative - achieve mission & objectives
Source:
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SWOT Matrix
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SWOT matrix is a way to analyze competitive
position, both internal and external aspects of
doing your business.
SWOT method is a key tool for company top
officials to formulate strategic plans.
Each letter in SWOT matrix stands for:
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S: Strengths
W: Weaknesses
O: Opportunities
T: Threats
Internal factors
External factors
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SWOT Matrix
Developing the SWOT
There are 8 steps
to develop a SWOT
Matrix.
SWOT Matrix
Internal Factors
External factors
Strengths
Weaknesses
S
W
SO strategies
WO strategies
ST strategies
WT strategies
Opportunities
O
Threats
T
SPACE Matrix
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The Strategic Position and ACtion Evaluation
matrix or short a SPACE Matrix is a strategic
management tool that focuses on strategy
formulation especially as related to the
competitive position of an organization.
The SPACE matrix is based on 4 areas of
analysis:
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Financial Strength (FS)
Internal strategic dimension
Competitive Advantage (CA)
Environmental Stability (ES)
External strategic dimension
Industry Strength (IS)
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SPACE Matrix
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The SPACE matrix is broken down to four
quadrants where each quadrant suggests a
different type or a nature of a strategy:
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Aggressive
Conservation
Defensive
Competitive
There are 7 steps to develop a SPACE
matrix.
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SPACE Matrix
Steps to develop a SPACE matrix
1.
2.
Select a set of variables to define FS, CA,
ES, & IS
Assign a numerical value:
1.
2.
3.
From +1 to +6 to each FS & IS dimension
From -6 to -1 to each ES & CA dimension
Compute an average score for each FS,
CA, ES, & IS
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Steps to Developing a SPACE Matrix
Steps to develop a SPACE matrix (cont’d)
1.
2.
3.
4.
Plot the average score on the appropriate
axis.
Add the average scores of CA and IS on the
x-axis and plot the point.
Add the average scores of ES and FS on
the y-axis and plot the point.
Draw a directional vector from the origin
through the new intersection point.
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Sample of a SPACE matrix
A completed SPACE matrix look like
BCG Matrix
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The BCG matrix model is a portfolio planning
model developed by Bruce Henderson of the
Boston Consulting Group in the early 1970's.
BCG matrix is often used to prioritize which
products within company product mix get
more funding and attention.
The BCG model is based on classification of
products into four categories, which focus on
market-share position & industry growth rate.
http://www.maxi-pedia.com/BCG+matrix+model
BCG Matrix
BCG Matrix
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BCG STARS
 High relative market share
and high growth rate
 Best long-run
opportunities for growth &
profitability
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Substantial investment to
maintain or strengthen
dominant position
 Integration strategies,
intensive strategies, joint
ventures
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BCG Matrix
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BCG Question mark
 Low relative market
share – compete in highgrowth industry
 Cash needs are high
 Case generation is low
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Decision to strengthen
(intensive strategies) or
divest
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BCG Matrix
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CASH COWS
 High relative market share,
competes in low-growth industry
 Generate cash in excess of
their needs
 Milked for other purposes
 Maintain strong position as long
as possible
 Product development,
concentric diversification
 If weakens—retrenchment or
divestiture
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BCG Matrix
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DOGS
 Low relative market
share & compete in slow
or no market growth
 Weak internal &
external position

Liquidation, divestiture,
retrenchment
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IE Matrix
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The Internal-External (IE) matrix, is another
strategic management tool used to analyze
working conditions and strategic position of a
business, which is based on an analysis of
internal and external business factors that are
combined into one suggestive model.
The IE matrix is based on the following two
criteria:
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Score from the EFE matrix -- this score is
plotted on the y-axis.
Score from the IFE matrix -- plotted on the
x-axis.
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IE Matrix
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Steps to develop IE matrix
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Record your organization’s IFE total score
on the X-axis. (Chapter 5)
Record your organization’s EFE total score
on the Y-axis. (Chapter 4)
Plot the location of your company in the
appropriate sector from quadrant I to IX.
IE Matrix
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Quadrant I,II,IV: Grow
and Build: Market
penetration, market
development, product
development.
Quadrant III,V,VII: Hold
and Maintain: Market
penetration, product
development.
Quadrant VI,VIII,IX:
Harvest or Divest:
Retrenchment,
divestiture, liquidation.
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Grand Strategy Matrix
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Tool for formulating alternative strategies
Based on two dimensions
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Competitive position (X-axis): can be either
strong or weak, depending on such factors as
market share, ability of the firm to compete on
price and quality, customer recognition, etc.
Market growth (Y-axis): can be considered as
either rapid or slow depending on the annual
growth rate (sales) within the particular market/
industry in which the firm competes.
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Grand Strategy Matrix
Rapid Market Grow
Quadrant 2:
Market penetration
Market development
Product development
Horizontal integration
Divestiture
Liquidation
Weak
Competitive
Position
Quadrant 3:
Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate diversification
Divestiture
Liquidation
Quadrant 1:
Market penetration
Market development
Product development
Forward integration
Backward integration
Horizontal integration
Concentric diversification
Quadrant 4:
Concentric Diversification
Horizontal diversification
Conglomerate Diversification
Joint Ventures
Slow Market Grow
Strong
Competitive
Position
Grand Strategy Matrix
Quadrant 2:
Quadrant 1:
Evaluate
Excellent
present approach
seriously
How to change to improve
competitiveness
Rapid market growth requires
intensive strategy
strategic position
Concentration on current
markets and products
Take risks aggressively when
necessary
Quadrant 3:
Quadrant 4:
Compete
Strong
in slow-growth
industries
Weak competitive position
Drastic changes quickly
Cost and asset reduction
indicated (retrenchment)
competitive position
Slow-growth industry
Diversification indicated to
more promising growth areas
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Conclusion
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Strategy Analysis is really important for
developing the company against the
economic crisis or the competitors.
There are lots of strategies which created by
the entrepreneur who face to the problem.
Although it has many choices, but we should
consider about its limited.
Efficient strategy while in the right condition,
and environment.
Thanks for your Attention !!!