STRATEGY GENERATION AND

SELECTION
By: Hamza Hamioud
and
Amro abdelrazig
 STRATEGY GENERATION AND
SELECTION
• Strategy analysis and choice focuses on generating and
evaluating alternative strategies, as well as on selecting
strategies to pursue. Strategy analysis and choice seeks to
determine alternative courses of action that could best
enable the firm to achieve its mission and objectives.
• The firm’s present strategies, objectives, and mission
together with the external and internal audit information,
provide a basis for generating and evaluating feasible
alternative strategies. The alternative strategies represent
incremental steps that move the firm from its current
position to a desired future state.
STRATEGY GENERATION AND SELECTION

• Alternative strategies are derived from the

firm’s vision, mission, objectives, external
audit, and internal audit and are consistent
with past strategies that have worked well.
The strategic analysis discusses the analytical
techniques in two stages i.e. techniques
applicable at corporate level and then
techniques used for business-level strategies.
THE STRATEGY-FORMULATION ANALYTICAL
FRAMEWORK
• Important strategy-formulation techniques
can be integrated into a three-stage decision-
making framework :
• The Input stage
• The Matching stage
• The Decision Stage
 THE INPUT STAGE
• The input tools require strategists to quantify
subjectivity during early stages of the strategy
formulation process. Making small decisions in
the input matrices regarding the relative
importance of external and internal factors
allows strategists to more effectively generate,
prioritize, evaluate, and select among
alternative strategies.
 THE MATCHING STAGE
• The matching stage of the strategy-formulation
framework consists of five techniques that can be
used in any sequence: the SWOT Matrix, the SPACE
Matrix, the BCG Matrix, the IE Matrix, and the Grand
Strategy Matrix. These tools rely on information
derived from the input stage to match external
opportunities and threats with internal strengths
and weaknesses. Matching external and internal key
factors is the essential for effectively generating
feasible alternative strategies .
 THE DECISION STAGE
• participants could individually rate strategies
on a 1-to-4 scale as to desirability, and then
sum the ratings from all participants, so that a
prioritized list of the best strategies could be
achieved.
The Strategic Position and Action Evaluation
(SPACE) Matrix
• The axes of the SPACE Matrix represent two internal
dimensions (financial position [FP] and competitive
position [CP]) and two external dimensions (stability
position [SP] and industry position [IP]). These four factors
are perhaps the most important determinants of an
organization’s overall strategic position.

• It is helpful here to elaborate on the difference between

the SP and IP axes. The term SP refers to the volatility of
profits and revenues for firms in a given industry. Thus, SP
volatility (stability) is based on the expected impact of
changes in core external factors such as technology,
economy, demographic, seasonality .
 The Internal-External (IE) Matrix
• The IE Matrix is similar to the BCG Matrix in that both tools involve
plotting a firm’s divisions in a schematic diagram; this is why they are
both called portfolio matrices. Also, in both the BCG and IE Matrices,
the size of each circle represents the percentage of sales contribution
of each division, and pie slices reveal the percentage of profit
contribution of each division. But there are four important differences
between the BCG Matrix and the IE Matrix, as follows:
• 1. The x and y axes are different.
• 2. The IE Matrix requires more information about the divisions than
does the BCG Matrix.
• 3. The strategic implications of each matrix are different. For these
reasons,
• 4. The IE Matrix has nine quadrants versus four in a BCG Matrix.
 The Internal-External (IE) Matrix
• For the previous four reasons, strategists in
multidivisional firms often develop both the BCG
Matrix and the IE Matrix in formulating alternative
strategies. A common practice is to develop a BCG
Matrix and an IE Matrix for the present, and then
develop projected matrices to reflect expectations
of the future. This before-and-after analysis can
be very effective in an oral presentation, enabling
students (or strategists) to pave the way for
(justify or give some rationale for) their
recommendations across divisions of the firm.
 The Grand Strategy Matrix
The Grand Strategy Matrix is based on two
evaluative dimensions: (1) competitive position
on the x-axis and (2) market (industry) growth
on the y-axis. Any industry whose annual
growth in sales exceeds 5 percent could be
considered to have rapid growth. Appropriate
strategies for an organization to consider are
listed in sequential order of attractiveness in
each quadrant of the Grand Strategy Matrix.
 The Grand Strategy Matrix
• Firms located in Quadrant I of the Grand Strategy Matrix are
in an excellent strategic position. For these companies,
continued concentration on current markets (market
penetration and market development) and products (product
development) is an appropriate strategy. It is unwise for a
Quadrant I firm to shift notably from its established
competitive advantages. When a Quadrant I organization has
excessive resources, then backward, forward, or horizontal
integration may be effective strategies. When a Quadrant I
firm is too heavily committed to a single product, then related
diversification may reduce the risks associated with a narrow
product line. Quadrant I firms can afford to take advantage of
external opportunities in several areas. They can take risks
aggressively when necessary
 The Quantitative Strategic Planning Matrix
(QSPM)
• The QSPM is a tool that allows strategists to
evaluate alternative strategies objectively, based
on previously identified external and internal key
success factors. Like other strategy-formulation
analytical tools, the QSPM requires assignment of
ratings (called attractiveness scores), but making
“small” rating decisions enables strategists to make
effective “big” decisions, such as which country to
spend a billion dollars in to sell a product.
 Cultural Aspects of Strategy Analysis and
Choice
• Strategies that require fewer cultural changes may be more attractive
because extensive changes can take considerable time and effort.
• Whenever two firms merge, it becomes especially important to
evaluate and consider culture-strategy linkages.
• Organizational culture can be the primary reason for difficulties a
firm encounters when it attempts to shift its strategic direction, as
the following statement explains:
• Not only has the “right” corporate culture become the essence and
foundation of corporate excellence, but success or failure of needed
corporate reforms hinges on management’s sagacity and ability to
change the firm’s driving culture in time and in tune with required
changes in strategies.
THANK YOU