The Strategy Formulation Analytical Framework

Important strategy-formulation techniques can be integrated into a three-

stage decision-making framework. The tools presented in this framework are
applicable to all sizes and types of organizations and can help strategists identify,
evaluate, and select strategies.

STAGE 1: THE INPUT STAGE

External Factor Evaluation (EFE) Competitive Profile Internal factor
Matrix Matrix (CPM) Evaluation Matrix (IFE)

STAGE 2: THE MATCHING STAGE

Strengths-Weaknesses- Strategic Position Boston Consulting Internal-External Grand Strategy
Opportunities-Threats and Action Evaluation Group (BCG) (IE) Matrix Matrix
(SWOT) Matrix (SPACE) Matrix

STAGE 3: THE DECISION STAGE

Quantitative Strategic Planning Matrix (QSPM)

Stage 1
 Consists of the External factor Evaluation (EFE) Matrix, Internal factor
Evaluation (IFE) and the Competitive Profiled Matrix (CPM).
 It is called the input stage. It summarizes the basic input information needed
to formulate strategies.
Stage 2
 Called the matching stage, focuses on generating feasible strategies by
aligning key external and internal factors.
Stage 3
 Called the decision stage, involves a single technique, the Quantitative
Strategic Planning Matrix (QSPM). A QSPM uses input information from
Stage 1 to objectively evaluate feasible alternative strategies identified in
Stage 2. It reveals the relevance attractiveness of alternative strategies and
thus provides an objective basis for selecting specific strategies. The QSPM
is a more robust way to determine the relative attractiveness of strategies
than the: summed ranking method described above, or the individual vs group
ranking method.

All nine techniques included in the strategy-formulation analytical framework

require the integration of intuition and analysis. Autonomous divisions in an
organization commonly use strategy-formulation techniques to develop strategies
and objectives. Divisional analyses provide a basis for identifying, evaluating, and
selecting among alternative corporate-level strategies.
Strategists themselves, not analytic tools, are always responsible and
accountable for strategic decisions. They must use analytical tools to facilitate,
rather than to diminish, communication. Without objective information and analysis,
personal biases, politics, prejudices, emotions, personalities, and halo error (the
tendency to put too much weight on a single factor) oftentimes play a dominant role
in the strategy-formulation process, undermining effectiveness. Thus, an analytical
approach is essential for achieving maximum effectiveness in strategic planning.