CHAPTER 6: STRATEGY ANALYSIS AND CHOICE environmental governmental and competitive

information.
- Largely involves making subjective decisions
based on objective information. Competitive profile Matrix – Identifies a firm’s major
competitors and their strengths and weaknesses.
The Nature of Strategy Analysis and Choice

- Choice seek to determine alternative courses of

action that could best enable the firm to
achieve its mission and objectives.
- Generating alternative strategies – identifying
appropriate and best courses of plans and
STAGE 2: THE MATCHING STAGE
actions among all available strategies to achieve
- Strategy is sometimes defined as the match an
them.
organization makes between its internal resources and
The Process of Generating and Selecting Strategies skills and the opportunities and risks created by its
external factors.
- Do not consider all feasible strategies because
of the infinite number of possible actions. -Generating feasible alternative strategies by aligning
- Advantages and disadvantages, tradeoffs, costs external and internal factors.
and benefits of these strategies should be
CONSISTS OF:
determined.
- All participants in the strategy analysis and Strengths-Weaknesses-Opportunities-Threats (SWOT)
choice should have the firm’s external and Matrix
internal audit information by their sides.
- All strategies proposed by participants should - SWOT Matrix is composed of nine cells
be considered and discussed in a series of - Always be specific to the extent possible in
meetings. Should be in writing. stating factors and strategies.
- is an important matching tool that helps
THE STRATEGY-FORMULATION ANALYTICAL managers develop four types of strategies:
FRAMEWORK SO (strengths-opportunities) Strategies, - use a
firm’s internal strengths to take advantage of
- All nine techniques included in the strategy-
external opportunities.
formulation require the integration of intuition
WO (weaknesses-opportunities) Strategies, -
and analysis.
aim at improving internal weaknesses by taking
STAGE 1: THE INPUT STAGE advantage of external opportunities.
ST (strengths-threats) Strategies, - use a firm’s
- Summarizes basic unit information needed to
strengths to avoid or reduce the impact of
formulate strategies.
external threats
- . Making small decisions in the input matrices
WT (weaknesses-threats) Strategies. - are
regarding the relative importance of external
defensive tactics directed at reducing internal
and internal factors allows strategists to
weakness and avoiding external threats.
generate and evaluate alternative strategies
more effectively.

CONSISTS OF:

Internal factor Evaluation Matrix – summarizes and

evaluates the major strengths and weaknesses in the
functional area of business.

External Factor Evaluation Matrix – Summarizes and

evaluates economic, social, cultural and demographic,
 Two external Dimensions
LIMITATIONS:
- Stability Position (SP)
1. SWOT does not show how to achieve a
- Industry Position (IP)
competitive advantage, so it must not be an
end in itself.
2. SWOT is a static assessment (or snapshot)
in time. As circumstances, capabilities,
threats, and strategies change, the
dynamics of a competitive environment may
not be revealed in a single matrix
3. SWOT analysis may lead the firm to
overemphasize a single internal or external
factor in formulating strategies.

The Strategic Position and Action Evaluation

(SPACE) Matrix

Four-quadrant framework
1. Aggressive
2. Conservative - (upper-left quadrant) of the
SPACE Matrix which implies staying close to
the firm’s basic competencies and not
taking excessive risks.
3. Defensive – (lower-left) - which suggests
that the firm should focus on rectifying
internal weaknesses and avoiding external
threats.
4. Competitive - (lower-right) indicating
competitive strategies
The Boston Consulting Group (BCG) Matrix
- graphically portrays differences among divisions
in terms of relative market share position and
industry growth rate.
- Relative market share position - is defined as
the ratio of a division’s own market share (or
revenues) in a particular industry to the market
share (or revenues) held by the largest rival firm
in that industry.

-
 Question Marks - Divisions in Quadrant I have a
low relative market share position, yet they
compete in a high-growth industry.
 Stars—Quadrant II businesses (Stars) represent
the organization’s best long-run opportunities
for growth and profitability. a division of an
organization has a high relative market share
Two internal Dimensions and is in a fast growing industry
- Financial Position (FP)  Cash Cows—Divisions positioned in Quadrant III
- Competitive Position (CP) have a high relative market share position but
compete in a low-growth industry.
  Dogs—Quadrant IV divisions of the organization
have a low relative market share position and
compete in a slow- or no-market-growth
industry; they are Dogs in the firm’s portfolio.
The Internal-External (IE) Matrix
- positions an organization’s various divisions in a
nine cell display through plotting them in a
schematic diagram.
3 Regions
- divisions that fall into cells I, II, or IV can
described as grow and build.
- divisions that fall into cells III, V, or VII can be
managed best with hold and maintain
strategies; market penetration and product
development are two commonly employed
strategies for these types of divisions.
- a common prescription for divisions that fall
into cells
- VI, VIII, or IX is harvest or divest.
The Grand Strategy Matrix
- based on two evaluative dimensions:
competitive position and market (industry)
growth.
STAGE 3: THE DECISION STAGE
The Quantitative Strategic Planning Matrix (QSPM)
- only one analytical technique in the literature
designed to determine the relative
attractiveness of feasible alternative actions.
- The QSPM uses input from Stage 1 analyses and
matching results from Stage 2 analyses to
decide objectively among alternative strategies.
- The QSPM is a tool that allows strategists to
evaluate alternative strategies objectively, based
on previously identified external and internal
critical success factors.
Positive Features and Limitations of the QSPM
- A positive feature of the QSPM is that sets of
strategies can be examined sequentially or
Simultaneously.
- Another positive feature of the QSPM is that it
requires strategists to integrate pertinent
external and internal factors into the decision
process.
- - The QSPM is not without some limitations. it
always requires intuitive judgments and
educated assumptions.
CULTURAL CHOICES OF STRATEGY CHOICES
Culture - includes the set of shared values, beliefs,
attitudes, customs, norms, personalities, heroes,
and heroines that describe a firm. It is the unique
way an organization does business.
THE POLITICS OF STRATEGY CHOICES
- Sometimes political biases and personal
preferences get unduly embedded in strategy
choice decisions. Internal politics affect the
choice of strategies in all organizations.
- In the absence of objectivity, political factors
sometimes dictate strategies, and this is
unfortunate. With development of improved
strategy-formation tools, political factors
become less important in making strategic
decisions
Because strategies must be effective in the marketplace
and capable of gaining internal commitment, the
following tactics used by politicians for centuries can aid
strategists:
• Equifinality—It is often possible to achieve similar
results using different means or Paths.
 Satisfying—Achieving satisfactory results with an
acceptable strategy is far better than failing to
achieve optimal results with an unpopular strategy.
 Generalization—Shifting focus from specific issues
to more general ones may increase strategists’
options for gaining organizational commitment.
 Focus on Higher-Order Issues—By raising an issue
to a higher level, many short term interests can be
postponed in favor of long-term interests.
 Provide Political Access on Important Issues— - Decision Stage
Strategy and policy decisions with significant
9. Includes all nine techniques that require integration
negative consequences for middle managers will
of intuition and analysis.
motivate intervention behavior from them.
- Strategy-formulation Framework
GOVERNANCE ISSUES
10. Defensive tactics directed at reducing internal
- A board of directors is a group of individuals
weakness and avoiding eternal threats.
who are elected by the ownership of a
corporation to have oversight and guidance over - WT Strategies
management and who look out for
shareholders’ interests. 11. Aim at improving internal weakness by taking
- The act of oversight and direction is referred to advantage of external opportunities.
as governance. - WO strategies

12. Focuses upon generating feasible alternative

QUIZ strategies by aligning key external factors and external
1. Use a firm’s strengths to avoid or reduce the impact factors.
of external threats. - Matching stage
- ST strategies 13. Use input from stage 1 to objectively evaluate
2. It’s four-quadrant framework indicates whether feasible alternative strategies identifies in Stage 2.
aggressive, conservative, defensive or competitive - QSPM
strategies are most appropriate for a given organization.
14. It summarizes the basic input information needed to
- Strategic Position and Action Evaluation (SPACE) formulate strategies.
Matrix
- Input Stage
3. It consists of the EFE Matrix, The IFE Matrix and The
Competitive Profile Matrix.

- Input Stage

4. An important matching took that helps managers

develop four types of strategies.

- SWOT

5. Use a firm’s internal strengths to take advantage of

the external opportunities

- SO Strategies

6. It consists of SWOT Matrix, SPACE Matrix, BCG Matrix,

IE MAtrix, Grand Strategy Matrix

- The Matching Stage

7. Reveals the relative attractiveness of alternative

strategies and thus provide objective basis for selecting
specific strategies.

- Qualitative Strategic Planning Matrix (qSPM)

8. Involves a single technique, the QSPM