Chapter 6 Strategy Analysis and Choice

Why Are Clear Objectives Needed?

To Provide Direction To Allow Synergy To Establish Priorities To Minimize Conflicts To Provide Purpose To Aid in Evaluations To Reduce Uncertainty To Stimulate Exertion

To Allocate Resources

To Design Jobs

To Motivate Managers & Employees

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Strategy-formulation Framework
Stage 1: The input stage External factor evaluation matrix (EFE) Competitive profile matrix (CPM) Internal factor evaluation matrix (IFE) Stage 2: The matching stage Strengths, weaknesses, opportunities and threats matrix (SWOT) Strategic position and action evaluation matrix (SPACE) Boston consulting group matrix (BCG) Internal-external matrix (IE) Grand strategy matrix (GS) Stage 3: The decision stage Quantitative strategic planning matrix (QSPM)

The TOWS Matrix (Figure 6-3)

STRENGTHS - S WEAKNESSES - W

List strengths

List weaknesses

OPPORTUNITIES - O

SO STRATEGIES

WO STRATEGIES

List opportunities

Use strengths to take advantage of opportunities

ST STRATEGIES Use strengths to avoid threats
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Overcome weaknesses by taking advantage of opportunities

WT STRATEGIES

THREATS - T

List threats

Minimize weaknesses and avoid threats

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Boston Consulting Group Matrix

Allows a multidivisional organization to manage its portfolio of businesses by examining the relative market share position and the industry growth rate of each division relative to all other divisions in the organization.
Relative market share position - ratio of a divisions own market share to the market share held by the largest rival.
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The BCG Matrix

Relative Market Share Position in the Industry High 1.0 High Industry Sales Growth Rate (Percent) +20 Medium .50 Low 0.0

Stars (II)

Question Marks (I)

?
Medium 0

Cash Cows (III)

Dogs (IV)

Low

-20
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The BCG Matrix and Strategic Direction

Question marks - strengthen them via market penetration, market development or product development, or sell them. Stars - forward, backward and horizontal integration; market penetration; market development; product development; or joint venture. Cash cows - for strong ones product development or concentric diversification; for weak ones, retrenchment or divestiture. Dogs - liquidate, divest or retrench.

The Internal-external Matrix and Strategic Direction

Positions an organizations various divisions in a nine-cell display based on SWOT analysis weighted scores (from EFE and IFE matrices). Grow and build (divisions in cells 1, 2 or 4): market penetration, market development, product development or backward, forward and horizontal integration. Hold and maintain (divisions in cells 3, 5, 7): market penetration or product development. Harvest or divest (divisions in cells 6, 8, 9): divest, liquidate, or retrench.

The Grand Strategy Matrix

Organizations or divisions are positioned into one of four quadrants based on market growth and competitive position. Each quadrant suggests alternative strategies.

The Decision Stage: The Quantitative Strategic Planning Matrix

Use input from stages 1 and 2. Not all strategies generated in stage 2 need to be included. Must assign an attractiveness score for each strategy by examining external and internal (SWOT) critical success factors and asking Does this factor affect the choice of strategies being made? If yes, then the strategies should be compared relative to that key factor and assign a score of 1 (not attractive) to 4 (highly attractive) to each factor. Calculate total attractiveness scores by multiplying weights by attractiveness scores.

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