David Sm13 Ppt 06

Chapter 6 Strategy Analysis & Choice

Strategic Management: Concepts & Cases 13th Edition Fred David

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -1

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Ch 6 -2

Strategy Analysis & Choice “Whether it’s broke or not, fix it – make it better. Not just products, but the whole company if necessary.” – Bill Saporito “Life is full of lousy options.” – General P.X. Kelley

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Ch 6 -3

Strategy Analysis & Choice 

 





Subjective decisions based on objective information Generating alternative strategies Selecting strategies to pursue Best alternative course of action to achieve mission & objectives Derived from vision, mission, objectives, external audit, and internal audit Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -4

Strategy Analysis & Choice Generating Alternatives – Participation in generating alternative strategies should be as broad as possible

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Ch 6 -5

Comprehensive StrategyFormulation Framework 

Stage 1 - Input Stage   



Stage 2 - Matching Stage    





EFE Matrix IFE matrix CPM

SWOT SPACE matrix BCG matrix IE Matrix Grand strategy matrix

Stage 3 - Decision Stage 

QSPM Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -6

Strategy-Formulation Framework External Factor Evaluation Matrix (EFE)

Stage 1: The Input Stage

Internal Factor Evaluation Matrix (IFE)

Competitive Profile Matrix (CPM)

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Ch 6 -7

Stage 2: The Matching Stage

Match

between organization’s internal resources & skills and the opportunities & risks created by its external factors

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Ch 6 -8

Strategy-Formulation Framework SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -9

Stage 2: The Matching Stage SWOT Matrix Strengths Weaknesses Opportunities Threats

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Ch 6 -10

SWOT Matrix Four Types of Strategies Strengths-Opportunities

(SO)

Weaknesses-Opportunities Strengths-Threats

(WO)

(ST)

Weaknesses-Threats

(WT)

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Ch 6 -11

SWOT Matrix 







SO strategies use a firm’s internal strengths to take advantage of external opportunities WO strategies improve internal weaknesses by taking advantage of external opportunities ST strategies use a firm’s strengths to avoid or reduce the impact of external threats WT strategies defensive tactics aimed at reducing internal weakness and avoiding external threats Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -12

Limitations with SWOT Matrix 

 

Does not show how to achieve a competitive advantage Provides a static assessment in time May lead the firm to overemphasize a single internal or external factor in formulating strategies

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Ch 6 -13

Strategy-Formulation Framework SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -14

SPACE Matrix Strategic Position & Action Evaluation Matrix

Aggressive Conservative Defensive Competitive

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Ch 6 -15

SPACE Matrix 

Internal dimensions  



Financial position (FP) Competitive position (CP)

External dimensions  

Environmental position (EP) Industry position (IP) Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -16

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Ch 6 -17

Strategy-Formulation Framework SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -18

BCG Matrix Boston Consulting Group Matrix Assists

multidivisional firm in formulating strategies Autonomous Divisions

divisions = business portfolio

may compete in different industries

Focus

on relative market-share position & industry growth rate Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -19

BCG Matrix 







Question Marks – low relative market share in a high-growth industry Stars – high relative market share in a highgrowth industry Cash Cows – high relative market share in a low-growth industry Dogs – Low relative market share in a slow or no growth industry Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -20

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Ch 6 -21

Strategy-Formulation Framework SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -22

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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Ch 6 -23

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Ch 6 -24

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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Ch 6 -25

Strategy-Formulation Framework SWOT Matrix

SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy Matrix

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Ch 6 -26

Grand Strategy Matrix

Tool for formulating alternative strategies 



Based on two dimensions 

Competitive position



Market growth Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -27

RAPID MARKET GROWTH 1. 2.

3. 4. 5. 6.

WEAK COMPETITIVE POSITION 1. 2. 3. 4. 5.

Quadrant II Market development Market penetration Product development Horizontal integration Divestiture Liquidation

1. 2.

3. 4. 5. 6. 7.

Quadrant III Retrenchment Related diversification Unrelated diversification Divestiture Liquidation

1. 2. 3.

Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification Quadrant IV Related diversification Unrelated diversification Joint ventures

STRONG COMPETITIVE POSITION

SLOW MARKET GROWTH Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -28

Grand Strategy Matrix Quadrant I

Excellent

strategic position

Concentration

on current markets/products Take

risks aggressively when necessary Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -29

Grand Strategy Matrix Quadrant II Evaluate

present approach

How

to improve competitiveness Rapid

market growth requires intensive strategy Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -30

Grand Strategy Matrix Quadrant III Compete Weak

in slow-growth industries

competitive position

Drastic

changes quickly

Cost

& asset reduction (retrenchment) Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -31

Grand Strategy Matrix Quadrant IV Strong

competitive position

Slow-growth

industry

Diversification

to more promising growth areas Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -32

Strategy-Formulation Analytical Framework

Stage 3: The Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

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Ch 6 -33

QSPM Quantitative Strategic Planning Matrix

Technique

designed to determine the relative attractiveness of feasible alternative actions

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Ch 6 -34

Strategic Alternatives

QSPM Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/ Environmental Technological Competitive

Weight

Strategy 1

Strategy 2

Strategy 3

Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Management Information Systems Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -35

Steps to Develop a QSPM

1.

2.

Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column Assign weights to each key external and internal factor

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Ch 6 -36

Steps to Develop a QSPM

3.

4. 5. 6.

Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing Determine the Attractiveness Scores Compute the Total Attractiveness Scores Compute the Sum Total Attractiveness Score

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Ch 6 -37

QSPM Advantages Sets

of strategies considered simultaneously or sequentially Integration

of pertinent external & internal factors in the decisionmaking process Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -38

QSPM Limitations

Requires

intuitive judgments & educated assumptions Only

as good as the prerequisite

inputs

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Ch 6 -39

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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -40

Politics of Strategy Choice

Politics in Organizations Hierarchy

Career

of command

aspirations

Allocation

of scarce resources

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Ch 6 -41

Politics of Strategy Choice Political Tactics for Strategists Equifinality Satisfying Generalization Higher-order Political

issues

access on important issues Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -42

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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Ch 6 -43

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Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -44