Chapter 6 Strategy Analysis & Choice

Strategic Management: Concepts & Cases 13th Edition Fred David

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -1

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

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

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -3

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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -4

Inc.Strategy Analysis & Choice Generating Alternatives – Participation in generating alternative strategies should be as broad as possible Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -5 .

Input Stage    EFE Matrix IFE matrix CPM  Stage 2 .Decision Stage  . Publishing as Prentice Hall Ch 6 -6  Stage 3 . Inc.Matching Stage      SWOT SPACE matrix BCG matrix IE Matrix Grand strategy matrix QSPM Copyright © 2011 Pearson Education.Comprehensive StrategyFormulation Framework  Stage 1 .

Strategy-Formulation Framework External Factor Evaluation Matrix (EFE) Stage 1: The Input Stage Internal Factor Evaluation Matrix (IFE) Competitive Profile Matrix (CPM) Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -7 . Inc.

Publishing as Prentice Hall Ch 6 -8 .Stage 2: The Matching Stage Match between organization’s internal resources & skills and the opportunities & risks created by its external factors Copyright © 2011 Pearson Education. Inc.

Strategy-Formulation Framework SWOT Matrix SPACE Matrix Stage 2: The Matching Stage BCG Matrix IE Matrix Grand Strategy Matrix Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -9 .

Publishing as Prentice Hall Ch 6 -10 . Inc.Stage 2: The Matching Stage SWOT Matrix Strengths Weaknesses Opportunities Threats Copyright © 2011 Pearson Education.

SWOT Matrix Four Types of Strategies Strengths-Opportunities (SO) (WO) Weaknesses-Opportunities Strengths-Threats (ST) (WT) Weaknesses-Threats Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -11 . Inc.

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 Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -12 .

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 Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -13 .

Inc. Publishing as Prentice Hall Ch 6 -14 .Strategy-Formulation Framework SWOT Matrix SPACE Matrix Stage 2: The Matching Stage BCG Matrix IE Matrix Grand Strategy Matrix Copyright © 2011 Pearson Education.

Inc. Publishing as Prentice Hall Ch 6 -15 .SPACE Matrix Strategic Position & Action Evaluation Matrix Aggressive Conservative Defensive Competitive Copyright © 2011 Pearson Education.

Inc. Publishing as Prentice Hall Ch 6 -16 .SPACE Matrix  Internal dimensions   Financial position (FP) Competitive position (CP)  External dimensions   Environmental position (EP) Industry position (IP) Copyright © 2011 Pearson Education.

Inc.Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -17 .

Publishing as Prentice Hall Ch 6 -18 . Inc.Strategy-Formulation Framework SWOT Matrix SPACE Matrix Stage 2: The Matching Stage BCG Matrix IE Matrix Grand Strategy Matrix Copyright © 2011 Pearson Education.

Inc.BCG Matrix Boston Consulting Group Matrix Assists multidivisional firm in formulating strategies Autonomous Divisions Focus divisions = business portfolio may compete in different industries on relative market-share position & industry growth rate Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -19 .

Publishing as Prentice Hall Ch 6 -20 .BCG Matrix     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 Copyright © 2011 Pearson Education. Inc.

Inc. Publishing as Prentice Hall Ch 6 -21 .Copyright © 2011 Pearson Education.

Strategy-Formulation Framework SWOT Matrix SPACE Matrix Stage 2: The Matching Stage BCG Matrix IE Matrix Grand Strategy Matrix Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -22 . Inc.

Inc. Publishing as Prentice Hall Ch 6 -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 Copyright © 2011 Pearson Education.

Inc.Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -24 .

II. or IX  Divided into three major regions    Copyright © 2011 Pearson Education.IE Matrix  Based on two key dimensions   The IFE total weighted scores on the x-axis The EFE total weighted scores on the y-axis Grow and build – Cells I. V. or VII Harvest or divest – Cells VI. Inc. VIII. Publishing as Prentice Hall Ch 6 -25 . or IV Hold and maintain – Cells III.

Inc. Publishing as Prentice Hall Ch 6 -26 .Strategy-Formulation Framework SWOT Matrix SPACE Matrix Stage 2: The Matching Stage BCG Matrix IE Matrix Grand Strategy Matrix Copyright © 2011 Pearson Education.

Grand Strategy Matrix Tool for formulating alternative strategies   Based on two dimensions   Competitive position Market growth Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -27 .

6. 2. 5. Inc. Publishing as Prentice Hall Ch 6 -28 . Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification Quadrant IV Related diversification Unrelated diversification Joint ventures Quadrant III Retrenchment Related diversification Unrelated diversification Divestiture Liquidation STRONG COMPETITIVE POSITION 1. WEAK COMPETITIVE POSITION 1. 3. 3. 5. Quadrant II Market development Market penetration Product development Horizontal integration Divestiture Liquidation 1. 4. 4. 2. 2. 6. 2. 3. 5. SLOW MARKET GROWTH Copyright © 2011 Pearson Education.RAPID MARKET GROWTH 1. 7. 3. 4.

Publishing as Prentice Hall Ch 6 -29 .Grand Strategy Matrix Quadrant I Excellent strategic position Concentration on current markets/products Take risks aggressively when necessary Copyright © 2011 Pearson Education. Inc.

Publishing as Prentice Hall Ch 6 -30 . Inc.Grand Strategy Matrix Quadrant II Evaluate How present approach to improve competitiveness Rapid market growth requires intensive strategy Copyright © 2011 Pearson Education.

Publishing as Prentice Hall Ch 6 -31 .Grand Strategy Matrix Quadrant III Compete Weak in slow-growth industries competitive position changes quickly Drastic Cost & asset reduction (retrenchment) Copyright © 2011 Pearson Education. Inc.

Grand Strategy Matrix Quadrant IV Strong competitive position Slow-growth industry Diversification to more promising growth areas Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -32 .

Strategy-Formulation Analytical Framework Stage 3: The Decision Stage Quantitative Strategic Planning Matrix (QSPM) Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -33 .

QSPM Quantitative Strategic Planning Matrix Technique designed to determine the relative attractiveness of feasible alternative actions Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -34 .

Inc. Publishing as Prentice Hall Ch 6 -35 .QSPM Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/ Environmental Technological Competitive Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Management Information Systems Weight Strategic Alternatives Strategy 1 Strategy 2 Strategy 3 Copyright © 2011 Pearson Education.

2. Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -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 1.

4. Copyright © 2011 Pearson Education. 6. Inc. Publishing as Prentice Hall Ch 6 -37 . 5.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 3.

Publishing as Prentice Hall Ch 6 -38 .QSPM Advantages Sets of strategies considered simultaneously or sequentially Integration of pertinent external & internal factors in the decisionmaking process Copyright © 2011 Pearson Education. Inc.

Inc. Publishing as Prentice Hall Ch 6 -39 .QSPM Limitations Requires intuitive judgments & educated assumptions Only as good as the prerequisite inputs Copyright © 2011 Pearson Education.

heroes and heroines that describe a firm Successful strategies depend on support of the firm’s culture Copyright © 2011 Pearson Education. customs. Inc.Cultural Aspects of Strategy Choice Organization Culture A set of values. personalities. Publishing as Prentice Hall Ch 6 -40 . attitudes. norms. beliefs.

Inc.Politics of Strategy Choice Politics in Organizations Hierarchy of command Career aspirations of scarce resources Allocation Copyright © 2011 Pearson Education. Publishing as Prentice Hall Ch 6 -41 .

Politics of Strategy Choice Political Tactics for Strategists Equifinality Satisfying Generalization Higher-order Political issues access on important issues Copyright © 2011 Pearson Education. Inc. Publishing as Prentice Hall Ch 6 -42 .

Governance Issues Board of Directors Roles & Responsibilities Control & oversight over management to legal prescriptions of stakeholders’ interests of stockholders’ rights Ch 6 -43 Adherence Consideration Advancement Copyright © 2011 Pearson Education. Publishing as Prentice Hall . Inc.

recording. without the prior written permission of the publisher. No part of this publication may be reproduced. mechanical. electronic. Inc. in any form or by any means. stored in a retrieval system.All rights reserved. Printed in the United States of America. Publishing as Prentice Hall Ch 6 -44 . Copyright © 2011 Pearson Education. or otherwise. photocopying. or transmitted.

Sign up to vote on this title
UsefulNot useful