Strategy Analysis &

StrategyChoice
analysis and choice largely involves making
subjective decisions based on objective information
Why we do strategy Analysis?
Strategy analysis and choice seek to determine
alternative courses of action that could best enable
the firm to achieve its mission and objectives.
How do we do it ?
The firms present strategies, objectives, and
mission, coupled with the external and internal audit
information, provide a basis for generating and
evaluating feasible alternative strategies.

Generating & Selecting Strategies

Identifying and evaluating alternative strategies
should involve Representatives from each
department and division of the firm.
When all feasible strategies identified by
participants are given and understood, the
strategies should be ranked in order of
attractiveness by all participants, with 1 = should
not be implemented, 2 = possibly should be
implemented, 3 = probably should be implemented,
and 4 = definitely should be implemented.
This process will result in a prioritized list of best
strategies that reflects the collective wisdom of the

Strategy
All nine techniques in strategy formulation

required analysis as well as intuition in

assigning weights
This gives a shift of word oriented to number
oriented planning which is rational to a great
extend
But even in these methods personal bias,
emotions, personalities and Halo error play a
dominant role

Stage 1

IFE - Amazon

summarizes and evaluates the major strengths and weaknesses in the functional
areas of a business, and it also provides a basis for identifying and evaluating
relationships among those areas

EFE - Exxon Mobil

Matrix allows strategists to summarize and evaluate economic, social, cultural,

demographic, environmental, political, governmental, legal, technological, and
competitive information as opportunities and threats

CPM - Mobile Co.

identifies a firms major competitors and its particular strengths and

weaknesses in relation to a sample firms strategic position
critical success factors in a CPM include both internal and external issues
This comparative analysis provides important internal strategic information

Stage 2

SWOT
MATRIX
OPPORTUNITIES
1
2 List
3 opportunites
4
5
THREATS
1
2 List
3 threats
4
5

STRENGTHS
1
2 List
3 strengths
4
5

SO Strategies
1
2 Use strength
3 to take advan4 tage of oppor5 tunities
ST
1
2
3
4
5

WEAKNESSES
1
2 List
3 weaknesses
4
5

WO Strategies
1
2 Overcome
3 weakness by
4 taking advantage
5 of opportunities

WT Strategies
1
Use strengths 2 Minimize
3 weaknesses &
to avoid
4 avoid threats
threats
5

Strategies

SAMPL
E SWOT

STRENGTHS--S
1. Good editorial quality.
2. High readership ratings.
3. Market leadership.
4. Strong staff loyalty.
5. United Board of Directors

WEAKNESSESW
1. Profit margin squeeze.
2. No. 2 in classifieds.
3. Lack of a shared culture.
4. Complacency.
5. Lack of entrepreneurial
spirit

OPPORTUNITIESO
1. Better relations with
government.
2. The youth market
3. The lower income
markets.
4. Better newspaper
technology.
5. Digital advertising.

SO STRATEGIES
1. Introduce a new product for
the youth market (S1, S2,
S3,O1,O2)
2. Introduce a new product for
the lower income market
(S1,S2,S3, O1,O3)
3. Offer digital advertising
services (S3, O4, O5).

WO STRATEGIES
1. Develop a readership
program involving employees
(W3,W4,O2,O3).
2. Convert non-revenue
earning products into a youth
publication (W1,W2, O2).

THREATS--T
1. Television.
2. High newsprint costs.
3. Declining readership.
4. Slowdown in the
economy.
5. Internet and on-line

ST STRATEGIES
1. Introduce a free print
medium. (S1,S2,S3, T1,T4)
2. Introduce a youth website.
(S1,S3,T1,T5)

WT STRATEGIES
1. Set up regional printing
sites (W1, T2).
2. Merge non-revenue
earning classifieds products
into the main classifieds
(W2,T2).

publications.

Disadvantages of SWOT Matrix

First, SWOT does not show how to achieve a
competitive advantage, so it must not be an end in
itself.
The matrix should be the starting point for a discussion on
how proposed strategies could be implemented as well as
cost-benefit considerations that ultimately could lead to
competitive advantage.
Second, SWOT is a static assessment (or snapshot) in
time.
A SWOT matrix can be like studying a single frame of a motion
picture where you see the lead characters and the setting but
have no clue as to the plot. As circumstances, capabilities,
threats, and strategies change, the dynamics of a
competitivee nvironment may not be revealed in a single
matrix.
Third, SWOT analysis may lead the firm to

Space Matrix
Internal Strategic Position
+ es

y-axis=fs

IFE

EFE

Space Matrix
External Strategic Position

x-axis=ca + is

CPM

5 Force

External Strategic Position x-axis=ca(-1.0)+is(5.6)=

+4.6
Internal Strategic Position y-axis=es(-5.2)+fs(2.0)=
Financial Strength
-3.2

Environmental Stability

Competitive Advantage

SPACE MATRIX

Industry Strength

Aggressive
+6
+5
+4
+3
+2
+1 +1+2+3+4+5+6
-6 -5 -4 -3 -2
-2
-1
-3
-4
(+4.6, -3.2)
-5
-6
Defensive
Competitive

Conservative

The Company
is competing
fairly well in
an unstable
environment

THE STRATEGIC POSITION AND ACTION

EVALUATION (SPACE) MATRIX
CONSERVATIVE
+6
Stay close to core comp,
+5
No excessive risks
+4
> Market Penetration
+3
CA
> Market Development
+2
> Product Development
+1
> Concentric
Diversification 0
-6

-5 -4 -3

-2

-1
Rectify internal weaknesses

_FS
_ >
_ >
_ >
_ >
_ >

AGGRESSIVE
Market Penetration
Market Development
Product Development
Integration
Diversification
IS

_ +1 +2 +3 +4 +5 +6
_ES > Integration
_ > Market Penetration

Relative Market Share

M
0.50

L
0.0

(Internal Strengths)

BCG MATRIX

Industry Sales Growth

(Industry Attractiveness)
Rate

H
1.0

STARS
QUESTION
H
Intensive strategies
MARKS
Integration strategies
Intensive Strategies
Diversification strategies
M
Divest
Double or Quit

Grow

DOGS
L
CASH COWS
Retrenchment
Product Development
Concentric Diversification Liquidation
Hold/HarvestDivestment
Divest
17

BCG MATRIX
Used for Portfolio Management.
Relative market share: ratio of a divisions own

market share to the market share held by the

largest rival firm. Dividing point is usually
selected to have only the two-three largest
competitors fall in the high market share region.
Industry Growth Rate: Dividing point is typically
the GNPs growth rate.
Draws attention to the cash flow, investment
characteristics and needs of the organizations
various divisions.

TOTAL EFE WEIGHTED SCORES

INTERNAL-EXTERNAL (IE) MATRIX

TOTAL IFE WEIGHTED SCORES

Grow &
Build

STRONG
3.0-4.0

AVERAGE WEAK
2.0-2.99
1.0-1.99

HIGH
3.0-4.0

II

MEDIUM
2.0-2.99

IVIntensive

LOW
1.0-1.99

VIIMarket

Intensive
Integrative

Integrative
penetration
Prod. devt

Intensive
Integrative

V Market

penetration
Prod. devt

VIII
Divestment

Hold &
Maintain

III Market

penetration
Prod. devt

VI
Divestment

IX
Divestment

Harvest &
Divest

TOTAL EFE WEIGHTED SCORE = 3.0

SAMPLE INTERNAL-EXTERNAL (IE)

MATRIX
TOTAL IFE WEIGHTED SCORE= 3.2
Intensive
Integrative

STRONG
3.0-4.0

AVERAGE WEAK
2.0-2.99
1.0-1.99

HIGH
3.0-4.0

II

III

MEDIUM
2.0-2.99

IV

VI

LOW
1.0-1.99

VII

VIII

IX

ABC

GRAND STRATEGY MATRIX

Grand Strategy Matrix - useful instrument for

creating different and alternative strategies

for an organization.
This matrix has two dimensions:
Competitive Position

Market growth

Quadrant 1
Companies positioned in this quadrant have

very strong strategic position.

Focus on their established competitive
advantage (CA)
Concentrate on existing market through set
of:
Product Development
Market Development
Market Penetration Strategies

Quadrant 2
Firms have a rapid growing industry but cannot

fight competently.
Evaluate existing approach in market
Firms usually use intensive strategy

Quadrant 3
Firms have slow growth market and relatively

weak position
Retrenchment Strategy >> Diversification

Quadrant 4
Slow growth industry but strong competitive

position
Diversify into different untapped business by
utilizing their existing resource
Face restricted internal growth and have high
cash flow intensity - go for unrelated
diversifications

STAGE 3

Quantitative

Strategic
Planning
Matrix(QSPM) is a high-level strategic
management approachfor evaluating possible
strategies
QSPM
provides
ananalyticalmethodfor
comparing feasible alternative actions
The QSPM methodfalls withinso-called stage
3 of the strategy formulation analytical
framework.

Why go for QSPM?

QSPMapproach attempts to objectively select

the beststrategy using input from other

management techniques and some easy
computations
The QSPM method uses inputs from stage1
analyses, matches them with results from
stage 2 analyses, and then decides objectively
among alternative strategies

Steps to form a QSPM

1. The overall strategic management analysis is
used toidentifykey strategic factors. This can
be done usingtheEFE&IFEmatrix.
2.
Formulation ofthetypeofthe strategy we
would like to pursue. This can be done usingthe
SWOTanalysis,
SPACEmatrixanalysis,BCGmatrixmodel,
or
theIEmatrixmodel.

Steps to form a QSPM (Cont.)

3. Each key external and internal factor should
have someweightin the overall scheme.
These weights form the IFE and EFE matrices.
4. Attractiveness Scores(AS) how each
factor is important or attractiveto each
alternative strategy. Attractiveness Scores are
determined by examining each key externaland
internal factor separately(0,1,2,3,4)

Steps to form a QSPM (Cont.)

5. Total Attractiveness Scores are defined as
the product of multiplying the weights (step 3)
by the Attractiveness Scores (step 4) in each
row.
6. CalculatetheSum Total Attractiveness
Scoreby adding allTotal Attractiveness Scores
in each strategy column of the QSPM.

IFE matrix for Retail Computer

Stage 1
Store
Key Internal Factors
Strengths
Weight Rating
Inventory turnover increased from 5.8 to 6.7
1 this year
0.05
Average customer purchasse increased from
2 $97 to $128 this year
0.07
3Employee Morale is excellent
0.1
In-store promotions resulted in 20% increase in
4 sales this year
0.05
Newspaper Advertising expenditure increased
5 10% this year
0.02
Revenues from repair/service segment of store
6 up 16% this year
0.15
In store Technical Support Personnel have MIS
7 college degrees
0.05
Store debt-total assets ratio declined to 34%
8 this year from 51%
0.03
Revenues from employee up 19% in last two
9 years
0.02

W*score
3

0.15

4
3

0.28
0.3

0.15

0.06

0.45

0.2

0.09

0.06

IFE matrix for Retail Computer

Stage 1
Store
Weakness
Weight Rating
Revenues from Software segment of
10 storedown 12% this year
0.1
Location of store negatively impacted by
new Highway34 to be completed in 1
11 year
0.15
Carpet and Paint in store somwhat in
12 despair
0.02
13Bathroom in store needs Refurbishing
0.02
Revenues from Business down 8% this
14 year
0.04
15Store has no website
0.05
Supplier on time delivery increased to 2.4
16 days in last two quarters
0.03
Oftentimes customers have to wait 5min
17 to check out
0.05
Total

W*score

0.2

0.3

1
1

0.02
0.02

1
2

0.04
0.1

0.03

0.05
2.5

EFE matrix for Retail ComputerStage 1

Store

Key External Factors

Opportunities
Weight Rating Wscore
Population of city growing 10%
1 annually
0.15
4
0.6
Rival computer store openeing 1 mile
2 away
0.05
2
0.1
Vehicle traffic passing store up 12% in
3 last year
0.1
1
0.1
Vendors average 6 new products per
4 year
0.05
3
0.15
Senior citizen use of computer 8% this
5 year
0.05
4
0.2
Small Business growth in area up 10%
6 this year
0.05
2
0.1
Desires for websites up 18% by realtors
7 yearly
0.1
3
0.3
Desires for websites up 12% by small
8 firms
0.05
1
0.05

Stage 1

EFE matrix for Retail Computer Store

Threats
9Best Buy opening a new store Nearby

Weight Rating Wscore

0.1

0.4

10Local universities offer Computer Repair

0.05

0.15

New bypass highway in 1 year will divert

11 traffic

0.05

0.15

0.1

0.1

13Gas prices up by 14% in pat year

0.05

0.2

14Vendors raising prices 8% Quarterly

0.05

0.1

12New Mall being builtnearby in 1 year

Total

2.7

Stage 2

SWOT
S

1.
2.

3.
4.
5.

6.

Inventory turnover
up 5.8 to 6.7
Average customer
purchase up $97 to
$128
Employee morale is
excellent
In store promo-20%
increase in sales
Newspaper ads
expense down by
10%
Revenues from repair

1. Software revenues
in store down by
16%
2. Location of store
hurt by new
Highway
3. Carpet & paint in
store in disrepair
4. Bathroom in store
needs refurbishing
5. Total store revenues
down by 8%
6. Store has no

Stage 2

SWOT (Cont)
O
1.
2.
3.
4.
5.
6.

Population of city
growing at 10%
Vehicle traffic passing
store up 12%
Senior citizens use of
products up by 8%
Small business grow
in area up 10%
Desire for websites up
18% by realtors
Desire for websites up
12% by small firms

1. Best buy opening

store in 1 year
2. Local university
offers computer
repair
3. New bypass
highway will divert
traffic in one year
4. New mall being
built near
5. Gas prices up by
14%
6. Vendor raising

Strategy based on SWOT

A) Purchase land to build new larger store
B) Fully renovate the existing store

QSPM

Opportunities
Population of city growing 10%
Rival computer store opening 1 mile
Vehicle traffic passing store up 12%
Vendors average six new products year
Senior citizen use of computers up 8%
Small business growth in area up 10%
Desire for web sites up 18% by realtors
Desire for web sites up 12% by small firms

Threats
Best Buy opening new store in 1yr near
Local university offers computer repair
New bypass Hwy 34 in 1 yr will divert traffic
New mall being built near
Gas prices up 14%
Vendors raising prices 8%

Final Stage

Strategic Alternatives
1
2
BUY NEW
FULLY
LAND and
RENOVATE
BUILD LARGER
EXISTING

STORE
STORE
Weight AS
TAS
AS
TAS
0.15
4
0.6
2
0.3
0.05
2
0.1
4
0.2
0.1
1
0.1
4
0.4
0.05

0.05

0.05

0.1

0.05

0.1
4
0.4
3
0.3
0.05

0.05
4
0.2
1
0.1
0.1
2
0.2
4
0.4
0.05

0.05

QSPM (Cont)
Strengths

Inventory turnover increased from 5.8 to 6.7

Average customer purchase increased from $97 to
$128
Employee morale is excellent
In-store promotions resulted in 20% increase in sales
Newspaper advertising expenditures increased 10%
Revenues from repair/service segment of store up
16%
In-store technical support personnel have MIS
college degrees
Stores debt-to-total assets ratio declined to 34%
Revenues per employee up 19 percent

Weaknesses

Revenues from software segment of store down 12%

Location of store negatively impacted by new
Highway 34
Carpet and paint in store somewhat in disrepair
Bathroom in store needs refurbishing
Revenues from businesses down 8%
Store has no web site
Supplier on-time-delivery increased to 2.4 days
Often times customers have to wait to check out

Final Stage

0.05-

0.07
0.10.050.02-

0.15

0.050.03
0.02

0.10.15
0.02
0.02
0.04
0.050.030.05

0.14

0.12

4
1
1
3

0.6
0.02
0.02
0.12

0.06

1
4
4
4
-

0.1

0.45

0.28

0.6

0.15
0.08
0.08
0.16

0.2

Rules for QSPM

If a particular factor affects one strategy and

not other then it affects the choice so the AS

should be recorded for both strategies
Scores in a row is never duplicated
QSPM is always prepared row-wise
If there is more than one strategy in QSPM
then AS scores can range from 1 to no. of
strategies being evaluated

Pros and Cons

Pros

Cons

Requires intuitive judgments and

Sets of strategies considered simultaneously

or sequentially
Integration of pertinent external and internal
factors in the decision-making process

assumptions
Only as good as the prerequisite

inputs
Only strategies in a given set are

evaluated relative to each other