CHAP06

Strategic Management
Concepts & Cases

8th edition
Fred R. David
Chapter 6:
Strategy Analysis &
Choice
PowerPoint Slides By:
Anthony F. Chelte
Western New England College
Ch. 6-1
© 2001 Prentice Hall
Comprehensive Strategic Management Model
External
Audit
Chapter 3
Vision Strategy Implement

Strategies Implement Measure &
& Analysis Strategies:
In Strategies: Evaluate
Mission & Marketing, Performance
Statements Action Mgmt Issues
Fin/Acct,
Choice
R&D, CIS
Chapter 5 Chapter 7 Chapter 9
Chapter 2 Chapter 6 Chapter 8
Internal
Audit
Chapter 4
Ch. 6-2
Strategy Analysis & Choice
“Strategic management is not a box of tricks or
a bundle of techniques. It is analytical
thinking and commitment of resources to
action. But quantification alone is not
planning. Some of the most important issues
in strategic management cannot be quantified
at all.”
—Peter Drucker—
Ch. 6-3
“Whether it’s broke or not, fix it—make it

better. Not just products, but the whole
company if necessary.”
—Bill Saporito—
Ch. 6-4
“Planning is often doomed before it ever

starts, either because too much is
expected of it or because not enough is
put into it.”
—T. J. Cartwright—
Ch. 6-5
Strategic Analysis and Choice:
Making subjective decisions based on

objective information
Ch. 6-6
Strategy-Formulation Analytical Framework
Threats Boston
Opportunities Consulting Grand
Weaknesses Group Strategy
Strengths Matrix Matrix
(TOWS) (BCG)
Ch. 6-7
TWOS MATRIX
Four Types of Strategies
Threats SO WO
Opportunities Strategies Strategies
Weaknesses
Strengths ST WT
(TOWS)
Strategies Strategies
Ch. 6-8
SO Strategies
Threats Use a firm’s

Opportunities SO internal
strengths to
Weaknesses Strategies
take advantage
Strengths of external
(TOWS) opportunities
Ch. 6-9
WO Strategies
Improving
Threats internal
Opportunities WO weaknesses by
Weaknesses Strategies taking
Strengths advantage of
(TOWS) external
opportunities
Ch. 6-10
ST Strategies
Threats Using firm’s

Opportunities ST strengths to
Weaknesses Strategies avoid or reduce
Strengths the impact of
(TOWS) external threats.
Ch. 6-11
WT Strategies
Defensive tactics
Threats aimed at
Opportunities WT reducing
internal
Weaknesses Strategies
weaknesses and
Strengths avoiding
(TOWS) environmental
threats.
Ch. 6-12
The TOWS Matrix
• List the firm’s key external opportunities

• List the firm’s key external threats
• List the firm’s key internal strengths
• List the firm’s key internal weaknesses
Ch. 6-13
The TOWS Matrix
• Match internal strengths with external opportunities

and record the resultant SO Strategies
• Match internal weaknesses with external
opportunities and record the resultant WO Strategies
• Match internal strengths with external threats and
record the resultant ST Strategies
• Match internal weaknesses with external threats and
record the resultant WT Strategies
Ch. 6-14
TOWS Matrix
Leave Blank Strengths-S Weaknesses-W
List Strengths List Weaknesses
Opportunities-O SO Strategies WO Strategies
List Opportunities Use strengths to take Overcome weaknesses

advantage of by taking advantage of
opportunities opportunities
Threats-T ST Strategies WT Strategies
List Threats Use strengths to avoid Minimize weaknesses

threats and avoid threats
Ch. 6-15
Boston Consulting Group Matrix
(BCG)
• Enhances multidivisional firms’ efforts to

formulate strategies
• Autonomous divisions (or profit centers)
constitute the business portfolio
• Firm’s divisions may compete in different
industries requiring separate strategy
Ch. 6-16
(BCG)
• Graphically portrays differences among

divisions
• Focuses on market share position and
industry growth rate
• Manage business portfolio through relative
market share position and industry growth
rate
Ch. 6-17
(BCG)
• Relative market share position defined:
 Ratio of a division’s own market share in a

particular industry to the market share held by the
largest rival firm in that industry.
Ch. 6-18
BCG Matrix
Relative Market Share Position
High Medium Low
1.0 .50 0.0
High
Industry Sales Growth Rate
+20
Stars Question Marks

II I
Medium
0
Cash Cows Dogs

III IV
Low
-20 Ch. 6-19
BCG Matrix
• Question Marks
• Stars
• Cash Cows
• Dogs
Ch. 6-20
BCG Matrix
• Question Marks
 Low
relative market share position yet
compete in high-growth industry.
 Cash needs are high
 Case generation is low
 Decisionto strengthen (intensive

strategies) or divest
Ch. 6-21
BCG Matrix
• Stars
 High relative market share and high
industry growth rate.
 Best long-run opportunities for growth and
profitability
 Substantialinvestment to maintain or
strengthen dominant position
 Integration strategies, intensive strategies,
joint ventures
Ch. 6-22
BCG Matrix
• Cash Cows
 High
relative market share position, but
compete in low-growth industry
 Generate cash in excess of their needs
 Milked for other purposes
 Maintain strong position as long as
possible
 Product development, concentric diversification
 If becomes weak—retrenchment or divestiture
Ch. 6-23
BCG Matrix
• Dogs
 Low
relative market share position and
compete in slow or no market growth
 Weak internal and external position
 Decision to liquidate, divest, retrenchment
Ch. 6-24
Grand Strategy Matrix
• Popular tool for formulating alternative

strategies
• Based on two evaluative dimensions
 Competitiveposition
 Market growth
Ch. 6-25
RAPID MARKET GROWTH
Quadrant II Quadrant I
• Market development • Market development
• Market penetration • Market penetration
• Product development • Product development
• Horizontal integration • Forward integration
• Divestiture • Backward integration
• Liquidation • Horizontal integration
WEAK • Concentric diversification STRONG
COMPETITIVE COMPETITIVE
POSITION Quadrant III Quadrant IV POSITION
• Retrenchment • Concentric diversification
• Concentric diversification • Horizontal diversification
• Horizontal diversification • Conglomerate
• Conglomerate diversification
diversification • Joint ventures
• Liquidation
SLOW MARKET GROWTH

Ch. 6-26
• Quadrant I
 Excellent strategic position
 Concentration on current markets and products
 Take risks aggressively when necessary
Ch. 6-27
• Quadrant II
 Evaluatepresent approach seriously
 How to change to improve competitiveness
 Rapid market growth requires intensive strategy
Ch. 6-28
• Quadrant III
 Compete in slow-growth industries
 Weak competitive position
 Drastic changes quickly
 Cost and asset reduction indicated (retrenchment)
Ch. 6-29
• Quadrant IV
 Strong competitive position
 Slow-growth industry
 Diversification indicated to more promising growth
areas
Ch. 6-30

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Strategic Management

Concepts & Cases

Vision Strategy Implement

“Whether it’s broke or not, fix it—make it

“Planning is often doomed before it ever

Strategic Analysis and Choice:

Making subjective decisions based on

Threats Use a firm’s

Threats Using firm’s

• List the firm’s key external opportunities

• Match internal strengths with external opportunities

List Strengths List Weaknesses

Opportunities-O SO Strategies WO Strategies

List Opportunities Use strengths to take Overcome weaknesses

List Threats Use strengths to avoid Minimize weaknesses

• Enhances multidivisional firms’ efforts to

• Graphically portrays differences among

• Relative market share position defined:

 Ratio of a division’s own market share in a

Stars Question Marks

Cash Cows Dogs

 Decisionto strengthen (intensive

• Popular tool for formulating alternative

SLOW MARKET GROWTH

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