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The Nature of Strategy Analysis and Choice
The Nature of Strategy Analysis and Choice
Competitive Profile
Matrix
1.The External Factor Evaluation (EFE)
Matrix
Price
0.02 4 0.08 1 0.02 3 0.06
competitive
Mgt. 0.01 2 0.02 4 0.04 2 0.02
experience
TOWS Matrix
SPACE Matrix
Stage 2:
BCG Matrix
The Matching Stage
IE Matrix
– Strengths-Opportunities (SO)
– Weaknesses-Opportunities (WO)
– Strengths-Threats (ST)
– Weaknesses-Threats (WT)
SO Strategies
Use a firm’s
Threats internal
SO
Opportunities strengths to take
Strategies
Weaknesses advantage of
Strengths external
(TOWS) opportunities
WO Strategies
Improving
Threats internal
Opportunities WO weaknesses by
Weaknesses Strategies taking
Strengths advantage of
(TOWS) external
opportunities
ST Strategies
Defensive
Threats tactics aimed at
Opportunities WT reducing internal
Weaknesses Strategies weaknesses
Strengths and avoiding
(TOWS) environmental
threats.
Steps in developing the TOWS 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
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
TOWS Matrix
Leave Blank Strengths-S Weaknesses-W
Ch 6-24
SPACE Matrix
Two Internal Dimensions
Financial Strength [FS]
Competitive Advantage [CA]
Ch 6-25
SPACE Matrix
Overall Strategic position determined by:
Ch 6-26
Developing the SPACE Matrix:
Ch 6-27
Cont......
4. Plot the average scores on the Matrix
Ch 6-28
SPACE Factors
Internal Strategic Position External Strategic Position
Ch 6-29
SPACE Factors
Internal Strategic Position External Strategic Position
Ch 6-30
SPACE Matrix
FS
Conservative Aggressive
+6
+5
+4
+3
+2
+1
CA IS
-6 -5 -4 -3 -2 -1 -1 +1 +2 +3 +4 +5 +6
-2
-3
-4
-5
Defensive -6 Competitive
ES Ch 6-31
3. BCG Matrix
Boston Consulting Group Matrix
Ch 6-32
BCG Matrix
Boston Consulting Group Matrix
High
+20
Stars Question Marks
II I
Medium
0
Ch 6-35
BCG Matrix
Stars
Ch 6-36
BCG Matrix
Cash Cows
Ch 6-37
BCG Matrix
Dogs
Ch 6-38
4. Grand Strategy Matrix
Popular tool for formulating alternative
strategies
Ch 6-39
RAPID MARKET GROWTH
Quadrant II Quadrant I
1. Market development 1. Market development
2. Market penetration 2. Market penetration
3. Product development 3. Product development
4. Horizontal integration 4. Forward integration
5. Divestiture 5. Backward integration
6. Liquidation 6. Horizontal integration
7. Concentric diversification
WEAK STRONG
COMPETITIVE COMPETITIVE
POSITION Quadrant III Quadrant IV
POSITION
1. Retrenchment 1. Concentric diversification
2. Concentric diversification 2. Horizontal diversification
3. Horizontal diversification 3. Conglomerate
4. Conglomerate diversification
diversification 4. Joint ventures
5. Liquidation
Quadrant I
– Excellent strategic position
– Concentration on current markets and
products
– Take risks aggressively when necessary
Quadrant II
• Evaluate present approach seriously
• How to change to improve competitiveness
• Rapid market growth requires intensive
strategy
Ch 6-41
Cont...
Quadrant III
•Compete in slow-growth industries
•Weak competitive position
•Drastic changes quickly
•Cost and asset reduction indicated (retrenchment)
Quadrant IV
• Strong competitive position
• Slow-growth industry
• Diversification indicated to more promising growth
areas
Ch 6-42
Formulation Framework
Ch 6-45
Steps of Quantitative Strategic Planning
Matrix
Ch 6-46
Cont....
Ch 6-47
QSPM Strategic Alternatives
Key External Factors Weight Strategy 1 Strategy 2 Strategy 3
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/
Environmental
Technological
Competitive
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Computer Information
Systems
Ch 6-48