Strategic MGMT 4

Strategic Management
Process:
Strategy formulation 3.
By: Prof. Dr. András Nábrádi
PhD, MBA
University of Debrecen
Faculty of Ag. Economics and Rural Development
Dept.: Business Management and Marketing
HUNGARY
© Dr. Nábrádi András

DE-AVK
Tasks of strategic management
Outline
• Tasks of
strategic
Strategy formulation
management
•Strategy
analysis and
choice
•Input stage
Strategy Implementation
•Matching
stage
•SWOT, SPACE,
BCG, IE, GSM
Strategy Evaluation
•Decision stage
•QSPM

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First stage of the strategic management
Outline
• Tasks of
strategic Develop
management Vision and
•Strategy Mission
analysis and Statements
choice
•Input stage Establish
•Matching long term Strategy formulation
stage objectives
•SWOT, SPACE, (Strategic planning)
BCG, IE, GSM
Generate,
•Decision stage
evaluate,
•QSPM and select
strategies
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Outline
• Tasks of
Business mission
strategic
management
•Strategy Internal analysis External analysis
analysis and
choice
•Input stage
•Matching
stage
Establishing long term objectives
•SWOT, SPACE,
BCG, IE, GSM
•Decision stage
•QSPM
Generating alternative strategies
Choosing particular strategies to pursue
Deciding what new business to enter
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Types of strategies
Defensive
Outline
• Retrenchment
• Tasks of
strategic
• Divestiture
management • Liquidation
•Strategy Do nothing
analysis and
choice Offensive
•Input stage • Integration
•Matching • Forward
stage • Backward
•SWOT, SPACE, • Horizontal
BCG, IE, GSM
• Intensive
•Decision stage
• Market penetration
•QSPM
• Market development
• Product Development
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• Diversification
Strategy Analysis and Choice
Outline
STAGE 1: The input stage
• Tasks of External factor Competitive Internal Factor
strategic Evaluation (EFE) Profile Evaluation
management (EFE)
•Strategy Matrix Matrix (CPM) Matrix
analysis and
STAGE 2: The matching stage
choice
SWOT Strategic Boston Internal- Grand
•Input stage
Matrix Position Consulting External Strategy
•Matching and Action Group (IE) Matrix Matrix
stage Evaluation (BCG) (GSM)
(SPACE) Matrix
•SWOT, SPACE,
Matrix
BCG, IE, GSM
STAGE 3: The decision stage
•Decision stage
•QSPM Quantitative Strategic Planning Matrix (QSPM)

DE-AVK
Strategy Analysis Input stage
Key external factors Weight Rating Weighted

Outline score
• Tasks of Opportunities
strategic
management 1. Demand for prepared food 0,07 4 0,28
increasing 10 % annually
•Strategy
2. Packaging technology offers 15 0,03 2 0,06
analysis and
% annual cost savings
choice
3 . >>>>…..9 or 10 items
•Input stage
Threats
•Matching
1. Increasing governmental 0,04 2 0,08
stage
regulation in the industry
•SWOT, SPACE, 2. Leading rival firms are more fully 0,07 1 0,07
BCG, IE, GSM integrated
•Decision stage 3. >>>>9 or 10 key items
•QSPM Total 1,00 Σ (1 to 4)
External Factor Evaluation Matrix (EFE)

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Outline Internal and External AVON Procter&Gambl

• Tasks of e
strategic Critical Success Factors Weight Rating Score Ratin Score
management g
•Strategy Advertising 0,20 1 0,2 3 0,60
analysis and Product quality 0,10 4 0,4 3 0,30
choice
Price competitiveness 0,10 3 0,3 4 0,40
•Input stage
Management 0,10 4 0,4 3 0,30
•Matching
stage Financial position 0,15 4 0,6 3 0,45
•SWOT, SPACE, Customer loyalty 0,10 4 0,4 2 0,20
BCG, IE, GSM
Global expansion 0,20 4 0,8 2 0,40
•Decision stage
Market share 0,05 1 0,05 3 0,15
•QSPM
TOTAL 1,00 3,15 2,80
Competitive Profile Matrix (CPM)

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Key internal factors Weight Rating Weighted

Outline score
• Tasks of Strengths
strategic
management 1. Our company provide 24-hour, 7 0,08 3 0,24
day services
•Strategy
2. Our company has 50 subsidiary 0,06 4 0,24
analysis and
in Europe and Asia
choice
3 . >>>>…..9 or 10 items
•Input stage
Weaknesses
•Matching
1. Our company total dept to equity 0,03 2 0,06
stage
ratio is 0,36 compared to the
•SWOT, SPACE, industry average of 0,9
BCG, IE, GSM 2. 86 % of the trade revenues come 0,07 1 0,07
•Decision stage from Europe
•QSPM 3. >>>>9 or 10 key items
Total 1,00 Σ (1 to 4)
© Dr. Nábrádi András Internal Factor Evaluation (IFE) Matrix

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Strategy Analysis Matching Stage
Outline Vision + Mission

• Tasks of
strategic
management
•Strategy Name Strengths Weaknesses Opportunities Threats
analysis and
choice
•Input stage
Resources
•Matching
Finance
stage Infrastructure a l l
r n t a
•SWOT, SPACE, Management
te sen ern
BCG, IE, GSM n
I e xt re
Environment
Pr E tu
Fu
•Decision stage
•QSPM Market share

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Outline
• Tasks of
strategic Internal, present
management
•Strategy
analysis and
Eliminate W W S Offensive
choice
External, future
•Input stage
•Matching
O
stage
•SWOT, SPACE,
BCG, IE, GSM
•Decision stage T
•QSPM
© Dr. Nábrádi András Defensive Avoid T

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Outline
Financial Strength
+1 +2 +3 +4 +5 +6
• Tasks of
strategic
management Internal
•Strategy
analysis and
choice Competitive Advantage Industry Strength
•Input stage -6 -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5 +6
-6 -5 -4 -3 -2 -1
•Matching
stage
•SWOT, SPACE, External
BCG, IE, GSM
•Decision stage
•QSPM Environmental Stability
© Dr. Nábrádi András The Strategic Position and Action Evaluation Matrix
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INTERNAL STATEGIC EXTERNAL STRATEGIC
Outline
POSITION POSITION
• Tasks of
Financial Strength (FS) Environmental Stability (ES)
(ES
strategic
management Return on investment Technological change
Leverage Rate of inflation
•Strategy
analysis and Liquidity Demand variability
choice Working Capital Price range of competing
Cash flow products
•Input stage
Barriers to entry market
•Matching Risk involved in business
stage Easy of exit market
•SWOT, SPACE, Competitive Advantage (CA) Industry strengths (IS)
BCG, IE, GSM
Market share Growth potential
•Decision stage Product quality Profit potential
•QSPM Product life cycle Financial stability
Consumer royalty Resource utilization
Technological know how Easy of entry into market
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Control over suppliers and Step Productivity,
1 capacity
Outline SPACE allows strategists to summarize and

• Tasks of evaluate strategy profile in one vector.
strategic
management 1. Select variables to define FS, CA ,ES, and IS.
•Strategy 2. Assign to each variables ranging from +1 (worst) to +6 (best) to FS
analysis and and IS quadrant. Assign to each variables ranging from -1 (best) to
choice -6 (worst) to CA and ES quadrant. On the FS-CA axes make
•Input stage comparison to competitors, IS-ES make comparison to other
•Matching
industries.
stage 3. Compute each quadrant average. ES-CA negative, IS-FS positive.
4. Add two scores respectively to determine directional vector of x-
•SWOT, SPACE,
BCG, IE, GSM axis and y axis. CA+IS and ES + FS.
5. Vector reveals the type of strategies recommended: aggressive,
•Decision stage
competitive, defensive, or conservative.
•QSPM

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Outline
POSITION POSITION
• Tasks of
(ES
strategic
management Return on investment Technological change
Leverage +1...+6 Rate of inflation -1...-6
•Strategy
analysis and Liquidity Demand variability
choice Working Capital Price range of competing
Cash flow products
•Input stage
Barriers to entry market
•Matching Risk involved in business
stage Easy of exit market
•SWOT, SPACE, Competitive Advantage (CA) Industry strengths (IS)
BCG, IE, GSM
Market share Growth potential
•Decision stage Product quality
-1...-6 Profit potential +1...+6
•QSPM Product life cycle Financial stability
Consumer royalty Resource utilization
Technological know how Easy of entry into market
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Control over suppliers and Step Productivity,
1 capacity
Outline
POSITION POSITION
• Tasks of
(ES
strategic
Rate R
management Return on investment 4 Technological change -2
•Strategy Leverage 5 Rate of inflation -1
Liquidity 6 Demand variability -3
analysis and Working Capital 4 Price range of competing products -6
choice Cash flow 5 Barriers to entry market -3
Risk involved in business -1
•Input stage Easy of exit market -1
AVERAGE 4,8 AVERAGE -2,4
•Matching
stage Competitive Advantage (CA) Industry strengths (IS)
Rate R
•SWOT, SPACE, Market share -4 Growth potential 4
BCG, IE, GSM Product quality -1 Profit potential 5
Product life cycle -2 Financial stability 1
•Decision stage Consumer royalty -2 Resource utilization 4
Technological know how -1 Easy of entry into market 6
•QSPM
Control over suppliers and distributors -5 Productivity, capacity 3
AVERAGE -2,5 AVERAGE 3,8

DE-AVK Step 2, 3
Outline
Financial Strength
+1 +2 +3 +4 +5 +6
A firm has financial strength
• Tasks of
strategic with a moderate dominating factor
management in the industry
•Strategy (+1,3,+2,4)
analysis and
•Input stage -6 -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5 +6
-6 -5 -4 -3 -2 -1
•Matching
stage
•SWOT, SPACE, X-axis=CA+IS =-2,5+ (3,8)= 1,3
BCG, IE, GSM y-axis= FS +ES= -2,4+(4,8)= 2,4
•Decision stage
Step 4,5
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Outline Conservative Financial Strength Aggressive
+1 +2 +3 +4 +5 +6
• Tasks of
strategic Tools: MP, MD, PD, Tools: MP, MD, PD,Back.I, Forw.I,
management Diversification Hor.I, and all combination
•Strategy
analysis and
•Input stage -6 -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5 +6
-6 -5 -4 -3 -2 -1
•Matching
stage Defensive Competitive
•SWOT, SPACE,
BCG, IE, GSM
Tools: Retrenchment Tools: MD,PD, Back.I,
divestiture, liquidation Forw.I, Hor.I,
•Decision stage
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Outline Business portfolio analysis

• Tasks of
strategic BCG Matrix graphically portrays differences among
management
•Strategy
divisions in term of relative market share and industry
analysis and growth rate.
choice
•Input stage
Relative market share is the ratio of a division’s own
•Matching
stage
market share to the market share of the largest rival
•SWOT, SPACE, firm in that industry.
BCG, IE, GSM
•Decision stage The growth rate % on the y axis range from -20 to + 20
•QSPM %.

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Outline
Relative market share position
• Tasks of
strategic
management
Industry sales growth rate % High +
•Strategy 20
analysis and
choice
•Input stage
•Matching Medium
stage 0
•SWOT, SPACE,
BCG, IE, GSM
•Decision stage
Low -
•QSPM 20 1 0,5
0,0
High Medium Low
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Division Market share IG rate
Outline
%
PERCENT PROFIT
1 0,8 15
• Tasks of 2 0,4 10
REVENUES
strategic 3 0,1 -1
management 4 0,6 -18

Industry sales growth rate High +
•Strategy 20
analysis and 1
choice 2
•Input stage
•Matching Medium
stage 0 3
•SWOT, SPACE,
BCG, IE, GSM 4
•Decision stage
Low -
•QSPM 20 1 0,5
0,0
High Medium
DE-AVK Relative
Low market share position
The Internal-External Matrix (IE) was developed from GE
Outline
Business Screen Matrix (GE)
• Tasks of
strategic
The total IFE weighted scores
The total EFE weighted Scores

management
•Strategy Strong Average Weak
analysis and 3,0 to 4,0 2,0 to 2,99 1,0 to 1,99
choice
High
•Input stage 3,0, to 4
•Matching
Medium
stage
2,0 to 2,99
•SWOT, SPACE,
BCG, IE, GSM Low
•Decision stage 1,0 to 1,99
•QSPM
Combine of External Factor Evaluation and Internal Factor Evaluation

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Outline IE Matrix
• Tasks of
Grow and
strategic build
management The total IFE weighted scores
The total EFE weighted Scores

•Strategy Strong Average Weak
analysis and 3,0 to 4,0 2,0 to 2,99 1,0 to 1,99
choice
High
•Input stage 3,0, to 4
•Matching
Medium
stage
2,0 to 2,99
•SWOT, SPACE,
BCG, IE, GSM Low
•Decision stage 1,0 to 1,99
•QSPM
Hold or Harvest or
maintain divest
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Rapid market growth
Outline
Quadrant II Quadrant I
• Tasks of 1.Market development. 1.Market development.
strategic 2. Market penetration 2. Market penetration
management 3. Product development 3. Product development
•Strategy 4. Horizontal integration 4. Forward integration
analysis and 5. Divestiture 5. Horizontal integration
choice 6. Liquidation 6. Backward integration
Weak 7. Related diversification Strong
•Input stage competitive competitive
•Matching position position
stage Quadrant III Quadrant IV
1. Retrenchment 1. Related diversification
•SWOT, SPACE,
2. Related diversification 3. Unrelated diversification
BCG, IE, GSM
3. Unrelated diversification 4. Joint ventures
•Decision stage 4. Divestiture
5. Liquidation
•QSPM
© Dr. Nábrádi András Slow market growth Grand Strategy Matrix

DE-AVK
Strategy Analysis and Choice
Outline
STAGE 1: The input stage
• Tasks of External factor Competitive Internal Factor
strategic Evaluation (EFE) Profile Evaluation
management (EFE)
•Strategy Matrix Matrix (CPM) Matrix
analysis and
STAGE 2: The matching stage
choice
SWOT Strategic Boston Internal- Grand
•Input stage
Matrix Position Consulting External Strategy
•Matching and Action Group (IE) Matrix Matrix
stage Evaluation (BCG) (GSM)
(SPACE) Matrix
•SWOT, SPACE,
Matrix
BCG, IE, GSM
STAGE 3: The decision stage
•Decision stage
•QSPM Quantitative Strategic Planning Matrix (QSPM)

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Quantitative Strategic Planning Matrix
Outline
• Tasks of
strategic
management
•Strategy QSPM is a tool that allows strategists
analysis and
choice to evaluate alternative strategies
•Input stage
•Matching
objectively but it requires good
stage intuitive judgment.
•SWOT, SPACE,
BCG, IE, GSM
•Decision stage
•QSPM

DE-AVK
The Quantitative Strategic Planning Matrix
Strategic alternatives
Outline
Name STR1 STR2 STR3
• Tasks of
strategic Key Factors Weight AS AS TA AS TA
management TA
•Strategy Key external factors (O/T)

analysis and Social/cultural/demographic
choice Technological
•Input stage Economy
Political/legal
•Matching
stage Competitive
Key internal factors (S/W)
•SWOT, SPACE,
BCG, IE, GSM Management
Marketing
•Decision stage
Finance/accounting
•QSPM Production/operations
R&D
MIS 2,00 1-8 1-8 1-8
DE-AVK AS= Attractiveness scores: 1 not, 2 somewhat, 3 reasonably 4 high
TOTAL
Strategy choice at STR 1 Backward
Key external factors Weight Attractiveness Total attr.
Outline Opportunities
1. Demand for prepared food increasing 10 % annually 0,07 1 0,07
• Tasks of
2. Packaging technology offers 15 % annual cost savings 0,03 1 0,03
strategic
3 . >>>>…..9 or 10 items
management
Threats
•Strategy 1. Increasing governmental regulation in the industry 0,04 4 0,28
analysis and 2. Leading rival firms are more fully integrated 0,07 3 0,21
choice 3. >>>>9 or 10 key items
Total 1,00
•Input stage
Key internal factors
•Matching Strengths
stage 1. Our company provide 24-hour, 7 day services 0,08 1 0,08
2. Our company has 50 subsidiary in Europe and Asia 0,06 1 0,06
•SWOT, SPACE,
3 . >>>>…..9 or 10 items
BCG, IE, GSM
Weaknesses
•Decision stage 1. Our company total dept to equity ratio is 0,36 compared 0,03 2 0,06
to the industry average of 0,9
•QSPM 2. 86 % of the trade revenues come from Europe 0,07 1 0,07
3. >>>>9 or 10 key items
Total 1,00 Σ (1 to 8)

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Strategy choice at STR 2 Forward
Key external factors Weight Attractiveness Total attr.
Outline Opportunities
1. Demand for prepared food increasing 10 % annually 0,07 4 0,28
• Tasks of
2. Packaging technology offers 15 % annual cost savings 0,03 3 0,09
strategic
3 . >>>>…..9 or 10 items
management
Threats
•Strategy 1. Increasing governmental regulation in the industry 0,04 3 0,12
analysis and 2. Leading rival firms are more fully integrated 0,07 4 0,28
choice 3. >>>>9 or 10 key items
Total 1,00
•Input stage
Key internal factors
•Matching Strengths
stage 1. Our company provide 24-hour, 7 day services 0,08 3 0,24
2. Our company has 50 subsidiary in Europe and Asia 0,06 4 0,24
•SWOT, SPACE,
3 . >>>>…..9 or 10 items
BCG, IE, GSM
Weaknesses
•Decision stage 1. Our company total dept to equity ratio is 0,36 compared 0,03 2 0,06
to the industry average of 0,9
•QSPM 2. 86 % of the trade revenues come from Europe 0,07 4 0,28
3. >>>>9 or 10 key items
Total 1,00 Σ (1 to 8)

DE-AVK
Outline
• Tasks of
strategic
management
•Strategy
analysis and
choice
•Input stage
Strategy Implementation
•Matching
stage
•SWOT, SPACE,
BCG, IE, GSM
Strategy Evaluation
•Decision stage
•QSPM

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Outline STRATEGY IMPLEMENTATION

• Tasks of
strategic
management •Establish annual objectives
•Strategy •Devise policies
analysis and •Motivate emlpoyees
choice Part of the
•Allocate resources business
•Input stage
•Developing strategy-supportive culture
•Matching planning
stage •Creating organizational structure
•SWOT, SPACE, •Redirecting marketing efforts
BCG, IE, GSM •Preparing budgets
•Decision stage •Developing information system
•QSPM

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Outline STRATEGY EVALUATION

• Tasks of
strategic
management All strategies are subject to future modification
•Strategy because external and internal factors are
analysis and
choice constantly changing!
•Input stage
•Matching •Reviewing external and internal factors
stage •Measuring performance
•SWOT, SPACE, •Taking corrective actions
BCG, IE, GSM
•Decision stage
•QSPM

DE-AVK
Thank you for your kind attention!
Outline
1. Vision
2. Mission
3. External
4. Internal
5. Long term
objectives
6. Analysis
7. Choice

DE-AVK

Strategic MGMT 4

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Strategic Management

© Dr. Nábrádi András

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Key external factors Weight Rating Weighted

External Factor Evaluation Matrix (EFE)

Outline Internal and External AVON Procter&Gambl

Competitive Profile Matrix (CPM)

Key internal factors Weight Rating Weighted

© Dr. Nábrádi András Internal Factor Evaluation (IFE) Matrix

Outline Vision + Mission

© Dr. Nábrádi András

© Dr. Nábrádi András Defensive Avoid T

Outline SPACE allows strategists to summarize and

© Dr. Nábrádi András

AVERAGE -2,5 AVERAGE 3,8

© Dr. Nábrádi András

Outline Conservative Financial Strength Aggressive

Outline Business portfolio analysis

© Dr. Nábrádi András

management 4 0,6 -18

The total EFE weighted Scores

Combine of External Factor Evaluation and Internal Factor Evaluation

The total EFE weighted Scores

© Dr. Nábrádi András Slow market growth Grand Strategy Matrix

© Dr. Nábrádi András

© Dr. Nábrádi András

•Strategy Key external factors (O/T)

© Dr. Nábrádi András

© Dr. Nábrádi András

© Dr. Nábrádi András

Outline STRATEGY IMPLEMENTATION

© Dr. Nábrádi András

Outline STRATEGY EVALUATION

© Dr. Nábrádi András

© Dr. Nábrádi András

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