Chapter 6 Part 2

Strategy Analysis & Choice

Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

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The Internal-External Matrix

 Positions an organization’s various divisions

in a nine-cell display
 Similar to BCG Matrix except the IE Matrix:
 Requires more information about the divisions
 Strategic implications of each matrix are different

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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
 Divided into three major regions
 Grow and build – Cells I, II, or IV
 Hold and maintain – Cells III, V, or VII
 Harvest or divest – Cells VI, VIII, or IX

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Strategy-Formulation Framework
SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

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Grand Strategy Matrix

 Tool for formulating alternative

strategies
 Based on two dimensions
 Competitive position
 Market growth

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 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
WEAK 7. Related diversification
STRONG
COMPETITIVE COMPETITIVE
POSITION Quadrant III Quadrant IV
POSITION
1. Retrenchment 1. Related diversification
2. Related diversification 2. Unrelated diversification
3. Unrelated diversification 3. Joint ventures
4. Divestiture
5. Liquidation

SLOW MARKET GROWTH

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Grand Strategy Matrix

Quadrant I

Excellent strategic position

Concentrationon current
markets/products
Take risks aggressively when
necessary
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Grand Strategy Matrix

Quadrant II

Evaluate present approach

How to improve
competitiveness
Rapid market growth requires
intensive strategy
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Grand Strategy Matrix

Quadrant III

Compete in slow-growth industries

Weak competitive position
Drastic changes quickly
Cost & asset reduction
(retrenchment)
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Grand Strategy Matrix

Quadrant IV

Strong competitive position

Slow-growth industry
Diversification
to more
promising growth areas

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Strategy-Formulation Analytical
Framework

Quantitative Strategic
Stage 3: Planning Matrix
The Decision Stage (QSPM)

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QSPM

Quantitative Strategic Planning Matrix

Technique designed to determine

the relative attractiveness of feasible
alternative actions

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 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
Management Information
Systems

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Steps to Develop a QSPM

1. Make a list of the firm’s key external

opportunities/threats and internal
strengths/weaknesses in the left column
2. Assign weights to each key external and
internal factor

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Steps to Develop a QSPM

3. Examine the Stage 2 (matching) matrices,

and identify alternative strategies that the
organization should consider implementing
4. Determine the Attractiveness Scores
5. Compute the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness
Score

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QSPM

Advantages

Sets of strategies considered

simultaneously or sequentially
Integration of pertinent external &
internal factors in the decision-
making process

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QSPM

Limitations

Requires intuitive judgments &

educated assumptions
Only as good as the prerequisite
inputs

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Cultural Aspects of Strategy
Choice

Organization Culture
A set of values, beliefs, attitudes,
customs, norms, personalities,
heroes and heroines that describe a
firm
Successful strategies depend on
support of the firm’s culture
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Politics of Strategy Choice

Politics in Organizations

Hierarchy of command
Career aspirations
Allocation of scarce resources

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Politics of Strategy Choice

Political Tactics for Strategists

Equifinality

Satisfying

Generalization

Higher-order issues
Political access on important issues
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Governance Issues

Board of Directors Roles & Responsibilities

Control & oversight over management

Adherence to legal prescriptions
Consideration of stakeholders’ interests
Advancement of stockholders’ rights

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