STAGE 2: MATCHING STAGE

Matching Stage
 focuses on generating feasible alternative strategies by aligning key external and internal factors.
 Techniques include the SWOT Matrix, the Strategic Position and Action Evaluation (SPACE)
Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the
Grand Strategy.

FIVE TECHNIQUES USED IN MATCHING STAGE:

1.) SWOT (Strength, Weakness, Opportunity and Threats) MATRIX
 It is an important matching tool that helps managers develop four types of strategies:

a. Strengths–Opportunities (SO) – use of internal strengths to take advantage of opportunities

b. Strengths–Threats (ST) - use of internal strengths to avoid or minimize the impact of threats.
c. Weaknesses–Opportunities (WO) - overcoming internal weaknesses by taking advantage of
external opportunities.
d. Weaknesses–Threats (WT) - Overcoming internal weaknesses and avoiding/minimizing
external threats.
 There are eight steps involved in constructing a SWOT Matrix:
1. List the firm’s key external opportunities.
2. List the firm’s key external threats.
3. List the firm’s key internal strengths.
4. List the firm’s key internal weaknesses.
5. Match internal strengths with external opportunities and record the resultant SO Strategies in
the appropriate cell.
6. Match internal weaknesses with external opportunities and record the resultant WO Strategies.
7. Match internal strengths with external threats and record the resultant ST Strategies.
8. Match internal weaknesses with external threats and record the resultant WT Strategies.

2.) SPACE (Strategic Position and Action Evaluation) MATRIX

 Its four-quadrant framework indicates whether aggressive, conservative, defensive, or
competitive strategies are most appropriate for a given organization.
  The axes of the SPACE Matrix represent 4 Dimension:
 two internal dimensions (financial position [FP] and competitive position [CP])
and,
 two external dimensions (stability position [SP] and industry position [IP])

 SPACE Matrix Axes:

 Internal Strategic Position:
 Financial Position [FP] – return on investment, leverage, liquidity, working capital,
cashflow, inventory turnover, earnings per share, price earnings ratio
 Competitive Position [CP] – market share, product quality, product life cycle, customer
loyalty, capacity utilization, technological know-how, control over suppliers and
distributors

 External Strategic Position:

 Stability Position [SP] – tech changes, rate of inflation, demand variability, price range
of competing products, barriers to entry into market, competitive pressure, ease of exit
from market, price elasticity of demand, risk involved in business
 Industry Position [IP] – growth potential, profit potential, financial stability, extent
leveraged, resource utilization, ease of entry into market, productivity, capacity
utilization.
The steps required to develop a SPACE Matrix are as follows:
1. Select a set of variables to define financial position (FP), competitive position (CP), stability
position (SP), and industry position (IP).
2. Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make
up the FP and IP dimensions. Assign a numerical value ranging from -1 (best) to -7 (worst) to
each of the variables that make up the SP and CP dimensions. On the FP and CP axes, make
comparison to competitors. On the IP and SP axes, make comparison to other industries.
3. Compute an average score for FP, CP, IP, and SP by summing the values given to the variables
of each dimension and then by dividing by the number of variables included in the respective
dimension.
4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix.
5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-
axis and plot the resultant point on Y. Plot the intersection of the new xy point.
6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection
point. This vector reveals the type of strategies recommended for the organization: aggressive,
competitive, defensive, or conservative.

3.) BCG (Boston Consulting Group) MATRIX

 It is a business tool, which uses relative market share and industry growth rate factors to
evaluate the potential of a business brand portfolio and suggest further investment
strategies.

 The 4 Quadrant in BCG Matrix

 Quadrant I of the BCG Matrix are called “Question Marks,” - the organization
must decide whether to strengthen them by pursuing an intensive strategy
 (market penetration, market development, or product development) or to sell
them.
 Quadrant II are called “Stars,”- represent the organization’s best long-run
opportunities for growth and profitability.
 Quadrant III are called “Cash Cows,” – indicate that the firm generate cash in
excess of their needs.
 Quadrant IV are called “Dogs.” – indicate that the businesses are often
liquidated, devastated, or trimmed through retrenchment.

 Steps in construction of BCG

1. Choose the unit
2. Define the Market
3. Calculate relative market share
4. Find out Market growth rate
5. Draw the Circles on a matrix.

QUIZ
1. It is a business tool, which uses relative market share and industry growth rate factors to evaluate
the potential of a business brand portfolio and suggest further investment strategies. Ans: BCG
(Boston Consulting Group) MATRIX

2. SPACE stands for Ans: Strategic Position and Action Evaluation

3. -4 The following includes in the 4 quadrants in BCG Matrix:

Cat, Stars, Cash Cows, Question, Strength.
 It focuses on generating feasible alternative strategies by aligning key external and internal
factors. Ans. Matching Stage