Lecture 15 Strategy Analysis And Choice

Grand Strategy Matrix

• Popular tool for formulating alternative strategies

• All organizations (or divisions) can be positioned in one of four quadrants

• Based on two evaluative dimensions:– Competitive position– Market growth

Quadrant IV

1. Concentric diversification

2. Horizontal diversification

3. Conglomerate diversification

4. Joint ventures

Quadrant III

1. Retrenchment

2. Concentric diversification

3. Horizontal diversification

4. Conglomerate diversification

5. Liquidation

Quadrant I

1. Market development

2. Market penetration

3. Product development

4. Forward integration

5. Backward integration

6. Horizontal integration

7. Concentric diversification

Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture

6. Liquidation

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAK COMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION

Grand Strategy Matrix

Quadrant I

• Excellent strategic position• Concentration on current markets and

products• Take risks aggressively when necessary

Grand Strategy Matrix

Quadrant II

• Evaluate present approach seriously• How to change to improve competitiveness• Rapid market growth requires intensive

strategy

Grand Strategy Matrix

Quadrant III

• Compete in slow-growth industries• Weak competitive position• Drastic changes quickly• Cost and asset reduction indicated

(retrenchment)

Grand Strategy Matrix

Quadrant IV

• Strong competitive position• Slow-growth industry• Diversification indicated to more promising

growth areas

Formulation Framework

Quantitative Strategic Planning Matrix

(QSPM)

Stage 3:The Decision Stage

QSPM

Quantitative Strategic Planning Matrix

• Only technique designed to determine the relative attractiveness of feasible alternative actions

QSPM

Quantitative Strategic Planning Matrix

• Tool for objective evaluation of alternative strategies

• Based on identified external and internal crucial success factors

• Requires good intuitive judgment

QSPM

Quantitative Strategic Planning Matrix

• List the firm’s key external opportunities & threats; list the firm’s key internal strengths and weaknesses

• Assign weights to each external and internal critical success factor

QSPM

Quantitative Strategic Planning Matrix

• Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization should consider implementing

• Determine the Attractiveness Scores (AS)

QSPM

Quantitative Strategic Planning Matrix

• Compute the total Attractiveness Scores

• Compute the Sum Total Attractiveness Score

QSPM

Key Internal FactorsManagementMarketingFinance/AccountingProduction/OperationsResearch and DevelopmentComputer Information Systems

Strategy 3Strategy 2

Strategy 1

WeightKey External FactorsEconomyPolitical/Legal/GovernmentalSocial/Cultural/Demographic/EnvironmentalTechnologicalCompetitive

Strategic Alternatives

QSPM

Limitations:

• Requires intuitive judgments and educated assumptions

• Only as good as the prerequisite inputs

QSPM

Positives:

• Sets of strategies examined simultaneously or sequentially

• Requires the integration of pertinent external and internal factors in the decision-making process

Cultural Aspects of Strategy Choice

Culture:

• The set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm

Cultural Aspects of Strategy Choice

Culture:

• Successful strategies depend on degree of support from a firm’s culture

Politics of Strategy Choice

Politics in organizations:

• Management hierarchy• Career aspirations• Allocation of scarce resources

Politics of Strategy Choice

Political tactics for strategists:

• Equifinality• Satisfying• Generalization• Focus on Higher-Order Issues• Provide Political Access on Important Issues

Role of A Board of Directors

Duties and Responsibilities:

1. Control and oversight over management2. Adherence to legal prescriptions3. Consideration of stakeholder interests4. Advancement of stockholders’ rights

Key Terms

• Aggressive quadrant• Attractiveness Scores (AS)• Board of Directors• Boston Consulting Group (BCG) Matrix• Business portfolio• Cash cows• Champions• Competitive Advantage (CA)

Key Terms

• Competitive quadrant• Conservative quadrant• Culture• Decision stage• Defensive quadrant• Directional vector• Dogs• Environmental Stability (ES)• Financial Strength (FS)

Key Terms

• Grand Strategy Matrix• Halo error• Industry Strength (IS)• Input stage• Internal-External (IE) Matrix• Long-term objectives• Matching• Matching stage• Quantitative Strategic Planning Matrix (QSPM)

Key Terms

• Question marks• Relative market share position• SO strategies• ST strategies• Stars• Strategic Position and Action Evaluation

(SPACE) Matrix• Strategy-formulation framework

Key Terms

• Sum total attractiveness scores• Threats-Opportunities-Weaknesses-

Strengths (TOWS) Matrix• Total Attractiveness Scores (TAS)• WO strategies• WT strategies

Thank You