Module 6
Strategy Analysis & Choice
Ch 6 -1
Ch 6 -2
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
Ch 6 -3
Strategy Analysis & Choice
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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
Ch 6 -4
Strategy Analysis & Choice
Generating Alternatives –
Participation in generating alternative
strategies should be as broad as
possible
Ch 6 -5
Comprehensive StrategyFormulation Framework

Stage 1 - Input Stage
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Stage 2 - Matching Stage
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EFE Matrix
IFE matrix
CPM
SWOT
SPACE matrix
BCG matrix
IE Matrix
Grand strategy matrix
Stage 3 - Decision Stage

QSPM
Ch 6 -6
Strategy-Formulation Framework
External Factor Evaluation
Matrix (EFE)
Stage 1:
The Input Stage
Internal Factor Evaluation
Matrix (IFE)
Competitive Profile Matrix
(CPM)
Ch 6 -7
Stage 2: The Matching Stage
Match
between organization’s internal
resources & skills and the opportunities &
risks created by its external factors
Ch 6 -8
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
Ch 6 -9
Stage 2: The Matching Stage
SWOT Matrix
Strengths
Weaknesses
Opportunities
Threats
Ch 6 -10
SWOT Matrix
Four Types of Strategies
Strengths-Opportunities
(SO)
Weaknesses-Opportunities
Strengths-Threats
(WO)
(ST)
Weaknesses-Threats
(WT)
Ch 6 -11
SWOT Matrix
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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
Ch 6 -12
Limitations with SWOT Matrix
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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
Ch 6 -13
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
Ch 6 -14
SPACE Matrix
Strategic Position & Action Evaluation Matrix
Aggressive
Conservative
Defensive
Competitive
Ch 6 -15
SPACE Matrix
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Internal dimensions

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Financial position (FP)
Competitive position (CP)
External dimensions


Environmental position (EP)
Industry position (IP)
Ch 6 -16
Ch 6 -17
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
Ch 6 -18
BCG Matrix
Boston Consulting Group Matrix
Assists
multidivisional firm in formulating
strategies
Autonomous
Divisions
divisions = business portfolio
may compete in different industries
Focus
on relative market-share position &
industry growth rate
Ch 6 -19
BCG Matrix
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Question Marks – low relative market share
in a high-growth industry
Stars – high relative market share in a highgrowth industry
Cash Cows – high relative market share in a
low-growth industry
Dogs – Low relative market share in a slow or
no growth industry
Ch 6 -20
Ch 6 -21
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
Ch 6 -22
The Internal-External Matrix
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
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
Ch 6 -23
Ch 6 -24
IE Matrix
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Based on two key dimensions
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The IFE total weighted scores on the x-axis
The EFE total weighted scores on the y-axis
Divided into three major regions
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Grow and build – Cells I, II, or IV
Hold and maintain – Cells III, V, or VII
Harvest or divest – Cells VI, VIII, or IX
Ch 6 -25
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix
Ch 6 -26
Grand Strategy Matrix
Tool for formulating alternative
strategies
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Based on two dimensions

Competitive position

Market growth
Ch 6 -27
RAPID MARKET GROWTH
1.
2.
3.
4.
5.
6.
WEAK
COMPETITIVE
POSITION
1.
2.
3.
4.
5.
Quadrant II
Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
1.
2.
3.
4.
5.
6.
7.
Quadrant III
Retrenchment
Related diversification
Unrelated diversification
Divestiture
Liquidation
1.
2.
3.
Quadrant I
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Related diversification
Quadrant IV
Related diversification
Unrelated diversification
Joint ventures
STRONG
COMPETITIVE
POSITION
SLOW MARKET GROWTH
Ch 6 -28
Grand Strategy Matrix
Quadrant I
Excellent
strategic position
Concentration
on current
markets/products
Take
risks aggressively when
necessary
Ch 6 -29
Grand Strategy Matrix
Quadrant II
Evaluate
present approach
How
to improve
competitiveness
Rapid
market growth requires
intensive strategy
Ch 6 -30
Grand Strategy Matrix
Quadrant III
Compete
Weak
in slow-growth industries
competitive position
Drastic
changes quickly
Cost
& asset reduction
(retrenchment)
Ch 6 -31
Grand Strategy Matrix
Quadrant IV
Strong
competitive position
Slow-growth
industry
Diversification
to more
promising growth areas
Ch 6 -32
Strategy-Formulation Analytical
Framework
Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix
(QSPM)
Ch 6 -33
QSPM
Quantitative Strategic Planning Matrix
Technique
designed to determine
the relative attractiveness of feasible
alternative actions
Ch 6 -34
Strategic Alternatives
QSPM
Key External Factors
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/
Environmental
Technological
Competitive
Weight
Strategy 1
Strategy 2
Strategy 3
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Management Information
Systems
Ch 6 -35
Steps to Develop a QSPM
1.
2.
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
Ch 6 -36
Steps to Develop a QSPM
3.
4.
5.
6.
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
Ch 6 -37
QSPM
Advantages
Sets
of strategies considered
simultaneously or sequentially
Integration
of pertinent external &
internal factors in the decisionmaking process
Ch 6 -38
QSPM
Limitations
Requires
intuitive judgments &
educated assumptions
Only
as good as the prerequisite
inputs
Ch 6 -39
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
Ch 6 -40
Politics of Strategy Choice
Politics in Organizations
Hierarchy
Career
of command
aspirations
Allocation
of scarce resources
Ch 6 -41
Politics of Strategy Choice
Political Tactics for Strategists
Equifinality
Satisfying
Generalization
Higher-order
Political
issues
access on important issues
Ch 6 -42
Governance Issues
Board of Directors Roles & Responsibilities
Control
& oversight over management
Adherence
to legal prescriptions
Consideration
of stakeholders’ interests
Advancement
of stockholders’ rights
Ch 6 -43