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Chapter 6 - Strategy Analysis and Choice
Chapter 6 - Strategy Analysis and Choice
Analysis and
Choice
Chapter Six
Chapter Objectives
6-3
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A Comprehensive Strategic-
Management Model
6-4
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The Process of Generating and
Selecting Strategies
Nature of Strategy Analysis & Choice
Establishing long-term objectives
• Generating alternative strategies
• Selecting strategies to pursue
• Best alternative – achieve mission & objectives
6-5
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Strategy Analysis & Choice
Generating Alternatives
• Participation in generating alternative strategies should
be as broad as possible
• Alternative strategies proposed by participants should be
considered, discussed, and ranked in order of
attractiveness
Ch 6 -7
Ch 7 -7 Copyright © 2011 Pearson Education
The Strategy-Formulation
Analytical Framework
6-8
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Comprehensive Strategy-Formulation Framework
Stage 1:
The Input Stage
Stage 2: Stage 3:
The Matching Stage The Decision Stage
Ch 6 -9
Ch 7 -9 Copyright © 2011 Pearson Education
A Comprehensive Strategy-
Formulation Framework
Stage 1 - Input Stage
summarizes the basic input information
needed to formulate strategies
consists of the EFE Matrix, the IFE Matrix,
and the Competitive Profile Matrix (CPM)
6-10
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Strategy-Formulation Analytical Framework
Ch 6 -11
Ch 7 -11 Copyright © 2011 Pearson Education
A Comprehensive Strategy-
Formulation Framework
Stage 2 - Matching Stage
focuses on generating feasible alternative
strategies by aligning key external and internal
factors
techniques include the Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix, the
Strategic Position and Action Evaluation
(SPACE) Matrix, the Boston Consulting Group
(BCG) Matrix, the Internal-External (IE) Matrix,
and the Grand Strategy Matrix
6-12
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Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
IE Matrix
6-14
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SWOT Matrix
6-15
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The Matching Stage
The Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix
helps managers develop four types of
strategies:
SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies
6-16
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SO Strategies
Strengths
Use a firm’s
Weaknesses
internal strengths
Opportunities
to take advantage
Threats SO
of external
Strategies
opportunities
SWOT
Strengths
Improving internal
Weaknesses
weaknesses by
Opportunities
WO taking advantage
Threats
Strategies of external
opportunities
SWOT
Defensive tactics
Strengths aimed at reducing
Weaknesses internal
Opportunities weaknesses &
Threats WT avoiding
Strategies environmental
SWOT threats
Threats – T ST WT Strategies
Strategies
Minimize weaknesses
List Threats and avoid threats
Use strengths to
avoid threats
Ch 6 -21
Ch 7 -21 Copyright © 2011 Pearson Education
A SWOT Matrix for a Retail
Computer Store
6-22
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A SWOT Matrix for a Retail
Computer Store
6-23
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Limitations with SWOT Matrix
SWOT Matrix
SPACE Matrix
IE Matrix
Ch 6 -25
Ch 7 -25 Copyright © 2011 Pearson Education
SPACE Matrix
Strategic Position & Action Evaluation Matrix
Ch 6 -26
Ch 7 -26 Copyright © 2011 Pearson Education
The SPACE Matrix
6-27
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The Strategic Position and Action
Evaluation (SPACE) Matrix
Two internal dimensions (financial
position [FP] and competitive position
[CP])
Two external dimensions (stability
position [SP] and industry position [IP])
Most important determinants of an
organization’s overall strategic position
6-28
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Factors That Make Up the
SPACE Matrix Axes
6-29
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Factors That Make Up the
SPACE Matrix Axes
6-30
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Steps to Develop a SPACE Matrix
6-31
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Steps to Develop a SPACE Matrix
6-32
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Steps to Develop a SPACE Matrix
6-33
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Steps to Develop a SPACE Matrix
6-34
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Example Strategy Profiles
6-35
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Example Strategy Profiles
6-36
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Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
IE Matrix
6-39
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The BCG Matrix
6-40
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BCG Matrix
Stars
Ch 6 -42
Ch 7 -42 Copyright © 2011 Pearson Education
BCG Matrix
Dogs
Ch 6 -43
Ch 7 -43 Copyright © 2011 Pearson Education
The BCG Matrix
6-44
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Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
IE Matrix
6-47
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IE Matrix
Based on two key dimensions
- The IFE total weighted scores on the x-axis
- The EFE total weighted scores on the y-axis
6-49
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Ch 7 -50 Copyright © 2011 Pearson Education
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
IE Matrix
6-52
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The Grand Strategy Matrix
6-53
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The Grand Strategy Matrix
Quadrant I
continued concentration on current markets
(market penetration and market development) and
products (product development) is an appropriate
strategy
Quadrant II
unable to compete effectively
need to determine why the firm’s current
approach is ineffective and how the company can
best change to improve its competitiveness
6-54
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The Grand Strategy Matrix
Quadrant III
must make some drastic changes quickly to avoid
further decline and possible liquidation
Extensive cost and asset reduction
(retrenchment) should be pursued first
Quadrant IV
have characteristically high cash-flow levels and
limited internal growth needs and often can
pursue related or unrelated diversification
successfully
6-55
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Strategy-Formulation Analytical Framework
Quantitative Strategic
Stage 3:
Planning Matrix
The Decision Stage (QSPM)
Ch 6 -56
Ch 7 -56 Copyright © 2011 Pearson Education
A Comprehensive Strategy-
Formulation Framework
Stage 3 - Decision Stage
involves the Quantitative Strategic Planning
Matrix (QSPM)
reveals the relative attractiveness of
alternative strategies and thus provides
objective basis for selecting specific
strategies
6-57
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The Quantitative Strategic
Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix
(QSPM)
objectively indicates which alternative
strategies are best
uses input from Stage 1 analyses and
matching results from Stage 2 analyses to
decide objectively among alternative
strategies
6-58
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The Quantitative Strategic
Planning Matrix (QSPM)
6-59
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Steps in a QSPM
6-60
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Steps in a QSPM (cont.)
6-61
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Positive Features of the QSPM
6-62
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Limitations of the QSPM
6-63
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A QSPM for a Retail
Computer Store
6-64
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A QSPM for a Retail
Computer Store
6-65
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The Politics of Strategy Choice
6-66
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The Politics of Strategy Choice
6-67
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Tactics to Aid Strategists
6-68
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Governance Issues
Board of directors
a group of individuals who are elected by the
ownership of a corporation to have oversight
and guidance over management and who
look out for shareholders’ interests
6-69
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Board of Director Duties and
Responsibilities
6-70
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Principles of Good Governance
6-72
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