Strategy Formulation

Analytical
Framework
Prof. Bharat Nadkarni
 Stage 1 : INPUT Stage
 Internal Factor Evaluation (IFE) Matrix

 External Factor Evaluation (EFE) Matrix

 Competitive Profile Matrix(CPM)

 Stage 2 : The Matching Stage
 SWOT Matrix
 Strategic Position and Action Evaluation (SPACE)
Matrix
 Boston Consulting Group (BCG) Matrix
 GE Nine Cell Matrix
 Directional Policy Matrix
 Hofer’s Life Cycle Matrix
 Internal External Matrix(IE) Matrix
 Grand Strategy Matrix
 Stage 3 : The decision stage
Quantitative Strategy Planning Matrix (QSPM)
The Internal Factor
Evaluation(IFE)
Matrix
 The Internal Factor Evaluation(IFE) Matrix

The Matrix summarises an organisation’s

following key factors ;
 General Management
 Marketing
 Finance
 Human Resource
 Production/Operations
 Research & Development
 The IFE Matrix answers four questions

1.What are company’s key strengths &

weaknesses?

2.What is Relative significance of each strength

and weakness to the company’s overall
performance?
 The IFE Matrix answers four questions
3.Does each factor represent a major weakness, a
minor weakness, a minor strength or a major
strength? The weightages to the factors may be
assigned as follows:
Factor Weightage
Major Weakness -2
Minor Weakness -1
Minor Strength +1
Major Strength +2
 The IFE Matrix answers four questions

4.What is the company’s total weighted score

resulting from the Internal Factor Evaluation
Matrix?

Is the score above or below the average of

+0.10?
SR .NO. KEY EXTERNAL FACTORS WEIGHT RATING Weighted
Score
The company's level of productivity
1 has dropped to 65% 0.20 -2 -0.40

The company's organisational

2 structure is being totally revamped 0.05 -1 -0.05
The company's earning per share
(EPS) was lowest in the industry in
3 2013 0.10 -1 -0.1
The company's return on
investment (ROI) was only 2.3%,the
second lowest in the industry in
4 2013 0.10 -1 -0.1
The Company is boosting R&D
expenditure to 20% of its sales in
5 2013 0.15 1 0.15
The company through 21 plant
locations off ers excellent customer
6 service 0.15 1 0.15

The company has established a

7 reputation for technical excellence 0.25 2 0.50

TOTAL WEIGHTED SCORES 1.0 0.15

 Conclusion
The company has scored slightly more than
the average in terms of overall internal
strategic position
External Factor
Evaluation (EFE)
Matrix
 External Factor Evaluation (EFE) Matrix

Also called:
– Environmental Scanning
– Industry analysis
 External Factor Evaluation (EFE) Matrix

Identification and evaluation of trends and events

beyond control of single firm

Examples:

Increased foreign competition

Populations shifts
Aging society
Information technology
Computer revolution
 Purpose of External Audit

Development of Opportunities

Threats to be avoided
 Importance of External Environment on Firm Behavior

Changes
Changesin
inthe
the Changes
Changesin
in Changes
Changesininthe
the
External
External Consumer
Consumer Products
Productsand
and
Environment
Environment Demand
Demand Services
ServicesaaFirm
Firm
Offers
Offers
 Relationship Between Key External Forces and an Organization

Competitors
Competitors
Suppliers
Suppliers
Creditors
Creditors
Customers
Customers
Economic Employees
EconomicForces
Forces Employees
Communities
Communities
Social,
Social,cultural,
cultural, Managers
Managers
demographic,
demographic,andand AN
environmental
Stockholders
Stockholders ANORGANIZATION’S
ORGANIZATION’S
environmental Labor OPPORTUNITIES
OPPORTUNITIESAND
forces Laborunions
unions AND
forces Governments THREATS
THREATS
Governments
Technological
Technological Trade
Tradeassociations
associations
forces
forces Special
Specialinterest
interestgroups
groups
Competitive Products
Products
Competitive
forces Services
Services
forces
Markets
Markets
Natural
Naturalenvironment
environment
 Economic Forces
• Examples include interest rates, tax rates,
inflation rates, consumption patterns, value of
the dollar, etc.

• What opportunities or threats might these

provide?
 Social, Cultural, Demographic, and
Environmental Forces
• Examples include population, race, age,
marriage/divorce rates, buying habits, ethical
concerns, gender roles, social responsibility,
pollution concerns, etc.
• Affects the way we live, work, produce and
consume.
• Potential threats and opportunities?
 Political, Governmental and Legal Forces

• Government regulates, deregulates,

subsidizes, employs and consumes.
• Examples include tax, antitrust and patent
legislation, lobbying activities, import-export
regulations, fiscal and monetary policy, etc.
• Any threats or opportunities?
 Technological Forces
• Include advances and applications in
technology.

• Threats or opportunities resulting from these

forces?
 Competitive Forces
• Understanding one’s competitors is a must.
• Competitive intelligence
Systematic and ethical process for gathering
and analyzing information about the
competition’s activities and general business
trends to further a business’ own goals.

– helps understand competition

– helps develop strategy
 External Factor Evaluation (EFE) Matrix
 Allows strategists to summarise an organisation’s
opportunities provided

 Threats posed by the external environmental factors

such as economic, social, cultural, demographic,
environmental, political, governmental, legal,
technological, and competitive information.
The EFE Matrix answers four questions

1.What are company’s environmental

opportunities and threats?

2.What is Relative significance of each

opportunity and threat to the company’s
overall performance?
 The EFE Matrix answers four questions
3.Does each factor represent a major threat, a
minor threat, a minor opportunity or a major
opportunity? The weightages to the factors may be
assigned as follows:
Factor Weightage
Major Threat -2
Minor Threat -1
Minor Opportunity +1
Major Opportunity +2
The EFE Matrix answers four questions

4.What is the company’s total weighted score

resulting from the External Factor Evaluation
Matrix?

Is the score above or below the average of

+0.10?
 WEIGHTATED
SR .NO. KEY EXTERNAL FACTORS WEIGHTAGE RATING SCORE
Due to heavy competition in the international
markets,nearly 90% sales of the company were
1 within India . 0.25 -2 -0.5
Due to entry of many new firms into the
industry, the company's market share has
2 declined by 10% 0.15 -1 -0.15
The government in its recent budget offered
3 incentives to this industry 0.1 1 0.1
The changing culture will result in the increase
4 in total Industry's sales 0.15 1 0.15
The company's diversification into the new
5 operations will increse the income by 30% 0.25 2 0.15
The decline in input prices will reduce the cost
6 of production by 15% 0.1 1 0.1
TOTAL WEIGHTED SCORE 1 0.25
 Conclusion
 It is observed from the exhibit that the
company has scored +0.25 which is well above
+0.10

 Therefore, it can be concluded that the

company has a strong external strategic
position.
Competitive Profile
Matrix (CPM)
 Competitive Profile Matrix (CPM)
 CPM identifies a firm’s major competitors and their strengths
and weaknesses in relation to a firm’s strategic positions.
 It Includes:

 Critical success factors (for competing)

 Weights (relative importance of factor to success in industry)

 Ratings (company’s strength/weakness regarding each

success factor)
 Competitor 1 Competitor 2
SR .NO. KEY EXTERNAL FACTORS WEIGHT RATING Weighted RATING Weighted
Score Score
1 Customer Service 0.22 2.00 0.44 1.00 0.22
2 Price 0.20 1.00 0.20 -1.00 -0.20
3 Product Quality 0.18 1.00 0.18 1.00 0.18
4 Technological Superiority 0.11 1.00 0.11 2.00 0.22
5 Dealer Relations 0.10 2.00 0.20 -1.00 -0.10
6 Financial Strength 0.10 1.00 0.10 2.00 0.20
7 Advertising Effectiveness 0.09 2.00 0.18 1.00 0.09
TOTAL WEIGHTED SCORES 1.00 1.41 0.61
 Conclusion
 Both the competitors are strong.

 Competitor 1 is more stronger than

competitor 2.
Strategic Position
and Action
Evaluation Matrix
(SPACE)
 Strategic Position and Action Evaluation Matrix (SPACE)

It is a four quadarant framework

It suggest which type of strategy is
appropriate for a company
 Aggressive
 Conservative
 Defensive
 Competitive
 SPACE Matrix Axes
 Financial Strength (FS)

 Competitive Advantage (CA)

 Environmental Stability (ES)

 Industry Strength (IS)

 Dimensions
Internal Dimensions
 Financial Strength
 Competitive Advantage
External Dimensions
 Industry Strength
 Environmental Stability
These dimensions are the most important
determinants of an organisation’s overall strategic
position.
 Financial Strength (FS)
• Return on Investment Important determinants of
i ti on
os • Leverage
c P organization’s overall
e gi • Liquidity
at strategic position
Str
• Working Capital
nal • Cash Flow
e r
Int • Ease of market exit
• Risk involved in business
Industry Strength (IS)
Competitive Advantage (CA) • Growth potential
• Market share
• Profit potential
• Product quality
• Financial stability
• Product life cycle
• Technological know-how
• Customer loyalty
• Resource utilization
• Competition’s capacity utilization
• Capital intensity
• Technological know-how
• East of entry into market
• Control over suppliers &
• Productivity, capacity utilization
distributors
Environmental stability (ES)
• Technological changes n
• Rate of inflation sitio
c Po
• Demand variability i
rateg
• Price range of competing products St
• Barriers to entry into market nal
te r
• Competitive pressure Ex
• Price elasticity of demand
SPACE Matrix FS
Best +6

+5
+4
Conservative +3 Aggressive
+2
+1
Worst
CA IS
-6 -5 -4 -3 -2 -1 0 + 1 + 2 +3 + 4 + 5 + 6
Best -1
-2

Defensive -3
Competitive
-4
-5

Worst -6
ES
 • Stay close to competencies • Use internal strengths
• Don’t take excessive risks • Take advantage of external opportunities
• Market penetration • Avoid external threats
• Market development
FS • Market penetration
• Product development • Market development
• Concentric diversification • Product development
• Backward integration
• Forward integration
• Horizontal integration
Ag
ti ve gr • Conglomerate diversification
a es • Concentric diversification
rv siv • Horizontal diversification
nse e
Co
• Combination
CA IS
De ti ve
fe ti
ns
ive pe
m
Co • Backward integration
• Improve internal weaknesses
• Avoid external threats • Forward integration
• Retrenchment • Horizontal integration
• Divestiture • Market penetration
• Liquidation • Market development
• Concentric diversification • Product development
ES • Joint venture
 ES avg.score = -3.4 + Average FS Score(3.16) = -0.24
Average CA Score = -2.14 +Avg.IS score (+3.43) = +1.29
 Conclusion
• According to graph,ABC Entertainment falls into
the competitive quadrant of the SPACE matrix.
• It shows that ABC entertainment is good in
financial strength and average in environmental
stability.
• Therefore the company has to achieve the
competitive advantage by adopting growth
strategies in order to increase market share and
explore the product demand.
Internal-External
(IE) Matrix
 Internal-External (IE) Matrix

• The Internal-External (IE) matrix is another strategic

management tool used to analyze working
conditions and strategic position of a business.
• The Internal External Matrix or short IE matrix is
based on an analysis of internal and external
business factors which are combined into one
suggestive model.
• The IE matrix is a continuation of the EFE matrix and
IFE matrix models.
 How does the Internal-External IE matrix
work?
The IE matrix belongs to the group of strategic
portfolio management tools. IE matrix positions
an organization into a nine cell matrix.
The IE matrix is based on the following two
criteria:
 1.Score from the EFE matrix -- this score is plotted
on the y-axis
 2.Score from the IFE matrix -- plotted on the x-axis
 How does the Internal-External IE matrix
work?
• The IE matrix works in a way that you plot the total
weighted score from the EFE matrix on the y axis and
draw a horizontal line across the plane.
• Then you take the score calculated in the IFE matrix,
plot it on the x axis, and draw a vertical line across
the plane.
• The point where your horizontal line meets your
vertical line is the determinant of your strategy. This
point shows the strategy that your company should
follow.
 How does the Internal-External IE matrix
work?
 On the x axis of the IE Matrix, an IFE total
weighted score of 1.0 to 1.99 represents a
weak internal position. A score of 2.0 to 2.99 is
considered average. A score of 3.0 to 4.0 is
strong.
 On the y axis, an EFE total weighted score of
1.0 to 1.99 is considered low. A score of 2.0 to
2.99 is medium. A score of 3.0 to 4.0 is high.
 IE matrix example

• Let us take a look at an example. We calculated IFE matrix for

an anonymous company on the IFE matrix page. The total
weighted score calculated on this page is 2.79 which points at
a company with an above-average internal strength.

• We also calculated the EFE matrix for the same company on

the EFE matrix page. The total weighted score calculated for
the EFE matrix is 2.46 which suggests a slightly less than
average ability to respond to external factors.

• Now we plot these values on axes in the IE matrix.

 Conclusion
• This IE matrix tells us that our company should
hold and maintain its position.
• The company should pursue strategies
focused on increasing market penetration and
product development
 What does the IE matrix tell me?
• Your horizontal and vertical lines meet in one
of the nine cells in the IE matrix. You should
follow a strategy depending on in which cell
those lines intersect.
• The IE matrix can be divided into three major
regions that have different strategy
implications.
 Cells I, II, and III
Cells I, II, and III suggest the grow and build strategy.
This means intensive and aggressive tactical strategies.
 Your strategies should focus on market penetration,
market development, and product development.
 From the operational perspective, a backward
integration, forward integration, and horizontal
integration should also be considered.
 Cells IV, V, and VI
• Cells IV, V, and VI suggest the hold and
maintain strategy.
• In this case, your tactical strategies should
focus on market penetration and product
development.
 Cells VII, VIII, and IX
• Cells VII, VIII, and IX are characterized with the
harvest or exit strategy.
• If costs for rejuvenating the business are low,
then it should be attempted to revitalize the
business.
• In other cases, aggressive cost management is
a way to play the end game.
What is the difference between the IE matrix
and BCG matrix?
• First, the IE matrix measures different values
on its axes. The BCG matrix measures market
growth and market share.
• The IE matrix measures a calculated value that
captures a group of external and internal
factors. This means that the IE matrix requires
more information about the business than the
BCG matrix.
What is the difference between the IE matrix
and BCG matrix?
 While values for each axis in the BCG matrix
are single-factor, values for each axis in the IE
matrix are multi-factor figures.
 Because the IE matrix is broader in its
definition, strategists often develop both the
BCG Matrix and the IE Matrix when assessing
their conditions and formulating strategies.
SWOT Analysis
Matrix
 SWOT analysis
 SWOT analysis, method, or model is a way to
analyze competitive position of your company.
 SWOT analysis uses so-called SWOT matrix to
assess both internal and external aspects of
doing your business.
 The SWOT framework is a tool for auditing an
organization and its environment.
 SWOT
• SWOT is the first stage of planning and helps
decision makers to focus on key issues.
• SWOT method is a key tool for company top
officials to formulate strategic plans.
• Each letter in the word SWOT represents one
strong word: S = strengths, W = weaknesses, O
= opportunities, T = threats.
 SWOT model
• SWOT model analyzes factors that are internal
to your business and also factors that affect
your company from outside.
• Strengths and weaknesses in the SWOT matrix
are internal factors.
• Opportunities and threats are external
factors.
 Popular tool
• SWOT can be used in conjunction with other
tools for strategic planning, such as the
Porter's Five-Forces analysis or the Balanced
Scorecard framework.
• SWOT is a very popular tool in marketing
because it is quick, easy, and intuitive.
 What is SWOT matrix?
• The concept of determining strengths,
weaknesses, threats, and opportunities is the
fundamental idea behind the SWOT model.
• To present the model in a more
understandable way, scholars came up with
so-called SWOT matrix.
• SWOT matrix is only a graphical representation
of the SWOT framework.
 Strengths
 Unique product
 Location of your business
 Patents, know-how, trade secrets
 Worker's unique skill set
 Corporate culture, company image
 Quality of your product
 Access to financing
 Operational efficiency
 Weaknesses
 Location of your business
 Lack of quality and customer service
 Poor marketing and sales
 Access to resources
 Undifferentiated products or services
 Opportunities and threats
Opportunities and threats are external value
creating (or destroying) factors a company
cannot control but emerge from :
 either the competitive dynamics of the
industry
 or market or from demographic, economic,
political, technical, social, legal, or cultural
factors.
 Opportunity in the SWOT model
A new emerging or developing market (niche
product, place - new country, less
competition)
Merger, joint venture, or strategic alliance
Market trends
New technologies
Social changes (for example demographics)
 Threats
 New competition in the market, possibly with
new products or services
 Price wars
 Economic conditions
 Political changes
 Competitor oligopoly or monopoly
 Taxation
 Availability of resources
 Subjective
• Factors related to each aspect of the SWOT model depend very
much of the nature of your business. SWOT for a manufacturing
company will be different from a SWOT for an internet start-up.

• SWOT analysis can be very subjective. Someone can see a new

firm coming into the market as a threat because it takes away
your current customers. Someone else might see the same
company as opportunity because that company might have
innovative ideas which your business can explore, and your
business might even benefit from possible takeover of that new
competitor.
BCG Matrix
Model
 BCG Matrix Model

• The BCG matrix or also called BCG model relates to

marketing.
• The BCG model is a well-known portfolio
management tool used in product life cycle theory.
BCG matrix is often used to prioritize which products
within company product mix get more funding and
attention.
• The BCG matrix model is a portfolio planning model
developed by Bruce Henderson of the Boston
Consulting Group in the early 1970's.
 BCG model
 The BCG model is based on classification of
products (and implicitly also company
business units) into four categories
 based on combinations of market growth and
market share relative to the largest
competitor.
 When to use the BCG matrix model?

• Each product has its product life cycle, and

each stage in product's life-cycle represents a
different profile of risk and return. In general,
a company should maintain a balanced
portfolio of products.
• Having a balanced product portfolio includes
both high-growth products as well as low-
growth products.
 When to use the BCG matrix model?

• A high-growth product is for example a new

one that we are trying to get to some market.
• It takes some effort and resources to market
it, to build distribution channels, and to build
sales infrastructure, but it is a product that is
expected to bring the gold in the future.
• An example of this product would be an iPod
or Iphone.
 When to use the BCG matrix model?
• A low-growth product is for example an
established product known by the market.
Characteristics of this product do not change
much, customers know what they are getting,
and the price does not change much either.
• This product has only limited budget for
marketing. It is the milking cow that brings in
the constant flow of cash. An example of this
product would be a regular Colgate toothpaste.
 When to use the BCG matrix model?
• But the question is, how do we exactly find out what phase
our product is in, and how do we classify what we sell?
Furthermore, we also ask, where does each of our products
fit into our product mix? Should we promote one product
more than the other one? The BCG matrix can help with this.

• The BCG matrix reaches further behind product mix.

Knowing what we are selling helps managers to make
decisions about what priorities to assign to not only products
but also company departments and business units.
 What is the BCG matrix and how does the
BCG model work?
Placing products in the BCG matrix results in 4 categories in a
portfolio of a company:

BCG STARS (high growth, high market share)

 Stars are defined by having high market share in a growing

market.
 Stars are the leaders in the business but still need a lot of
support for promotion a placement.
 If market share is kept, Stars are likely to grow into cash cows.
 BCG QUESTION MARKS (high growth, low
market share)
 These products are in growing markets but have low market
share.
 Question marks are essentially new products where buyers have
yet to discover them.
 The marketing strategy is to get markets to adopt these products.
 Question marks have high demands and low returns due to low
market share.
 These products need to increase their market share quickly or
they become dogs.
 The best way to handle Question marks is to either invest heavily
in them to gain market share or to sell them.
 BCG CASH COWS (low growth, high market
share)
 Cash cows are in a position of high market share in a
mature market.
 If competitive advantage has been achieved, cash cows
have high profit margins and generate a lot of cash
flow.
 Because of the low growth, promotion and placement
investments are low.
 Investments into supporting infrastructure can improve
efficiency and increase cash flow more.
 Cash cows are the products that businesses strive for.
BCG DOGS (low growth, low market share)

Dogs are in low growth markets and have low

market share.
Dogs should be avoided and minimized.
Expensive turn-around plans usually do not
help.
 limitations of the BCG matrix model

 The first problem can be how we define

market and how we get data about market
share
 A high market share does not necessarily lead
to profitability at all times
 The model employs only two dimensions –
market share and product or service growth
rate
 limitations of the BCG matrix model
 Low share or niche businesses can be profitable
too (some Dogs can be more profitable than cash
Cows)
 The model does not reflect growth rates of the
overall market
 The model neglects the effects of synergy
between business units
 Market growth is not the only indicator for
attractiveness of a market
 The GE/
McKinsey Matrix
 The GE/ McKinsey Matrix
This is a form of portfolio analysis used for
classifying product lines or strategic business units
within a large company
It was developed by McKinsey for the General
Electric Company
It assesses areas of the business in terms of two
criteria:
 The attractiveness of the industry/market concerned
 The strength of the business
How does it differ from the Boston Matrix?

There are similarities:

 Two dimensions are used to create a matrix

 Each cell suggests an appropriate strategy

 In both cases we are concerned with the future

strategy for a particular area (eg. a division) within
the firm
How does it differ from the Boston Matrix?

There are major differences

 The GE matrix involves a wider analysis of the firm’s
operations
 The dimensions of the GE matrix are industry
attractiveness and business strength (rather than
market share and market growth)
 There are nine cells and a wider choice of strategies
 The Boston Matrix focuses on products within the
firms product range. The GE matrix can be extended to
look at strategic business units.
 Strategic Business Units (SBUs)
A particular product market combination that typically
requires its own business plan.
A part of a company that is large enough to have its own
well defined markets, attract its own set of competitors
and demand tangible resources and capabilities from the
overall corporation.
A discrete grouping within an organisation with delegated
responsibility for strategically managing a product/ service
or group of product of services.
A division within a large national or multinational company
is a SBU.
 The GE/ McKinsey Matrix
High strength Medium strength Low strength

High X Cell 1 Y Cell 2 Y Cell 3

attractiveness

Medium Y Cell 4 Y Cell 5 Y Cell 6

attractiveness

Low Y Cell 7 Y Cell 8 Z Cell 9

attractiveness
 Industry attractiveness
 The vertical axis of the matrix is industry
attractiveness.
 This concerns the attractiveness to a firm of
entering, or remaining, in a particular industry.
 Industry attractiveness is assessed by
considering a range of factors each of which is
given a weighting to produce a composite
picture.
 Criteria which makes a market
attractive
• Variability
Market sizeof demand
• Growth
Rate of technological
rate change
• Overall returns in the industry
Volatility
• Industry profitability
Availability of market intelligence
• Intensity of of
Availability competition
work force
• Profit margins
Global opportunities
• Differentiation
PEST factors
• Industry
Entry andfluctuations
exit barrier
• Customer/supplier
Government regulation
relations
 Business unit strength
• The horizontal axis of the matrix is the strength of the
business unit.
• This refers to how strong the firm or SBU is in terms of the
market.
• A market might be very attractive but the firm lacks strengths
in terms of supplying the market.
• As with industry attractiveness a composite of industry
strength is based on weighting a range of factors.
• Notice that the Boston Matrix dimensions are included in the
GE matrix - market growth is an element of industry attractive
and market share is an element in business strength.
 Assessing internal strengths
• Market share
Production capacity
• Growth
Productionin market share
flexibility
• Marketing
Unit costs capabilities
• Management competence
R and D capabilities
• Skills
Qualityof workforce
• Distribution
Reliability network
• Size and quality
Company image of sales force
• Service
Productquality
uniqueness
• Customer loyalty
Cost and profitability
• Brand recognition
Profit margins relative to competitors
• Manufacturing capability
• Organisational skills
 The matrix
 Arranges the company’s SBUs in three bands and nine boxes

 Band X - Successful SBUs – in which the business is strong

and the industry is attractive

 Band Y - Mediocre SBUs – in which either the industry is less

attractive and/or the business is lacks strengths

 Band Z - Disappointing SBUs - in which the business is weak

and the industry unattractive
 Recommended strategies
Grow  strong business units in attractive industries
 average business units in attractive industries
 strong units in average industries
Hold  average business units in average industries
 strong units in weak industries
 weak units in attractive industries
Harvest  weak units in unattractive industries
 average units in unattractive industries
 weak units in average industries
 Options for each cell
 6Grow
1Protectwisely
position
- invest
-maintain
in attractive
position
areas
 7Regroup
2Try harder- preserve
- challengecashtheflow,
leader
defend strengths
 8Keep
3Be choosy
investment
- keep anto aeye
minimum-
of opportunities
protect the
– if risk
position
is lowthat
 you have - reduce cost to maximise profits
4Harvest

 9Get out carefully
5Manage
 Invest for growth (cell 1)
This is a very attractive market in which the firm has
great strength
Distinctive competences can be harnesses to good
advantages
Recommended strategies:
Invest for growth
search for global opportunities
maximise market share
seek dominance
concentrate on building up strength in this area
 Manage selectively (cells 2 and 4)
These two cells record a high rating in either
business strength or industry attractiveness and a
medium rating in the other This suggests that these
SBUs show some promise
Recommended strategy:
Investment for growth
Invest to expand existing segments
Search for new segments
Build on existing strengths in order maintain competitive
ability and even to challenge for leadership
 Manage selectively (cells 3,5,7)
In each case the SBU has certain positive features
High in one of the dimensions or middling in both
Recommended strategy
 Invest for earnings
 Maintain/defend market position
 Concentrate on selected segments
 Specialise in niches where strengths could be built on
 Invest selectively
 Harvest (cells 6 and 8)
In each case either market attractiveness or business
strength is low and other one is only medium
• Recommended strategies:
Manage for cash
Avoid unnecessary investment
Move to the most profitable segments
Prune product lines
Specialise in profitable niches
Consider exit
 Divest (Cell 9)
This is an unattractive market in which the
firm has no strength
Recommended strategy:
Exit the market.
Time the exit in order to sell at a time that will
maximize cash value.
In the meantime, cut fixed costs and avoid
investment.