![SPACE Matrix
The axes of the SPACE Matrix represent
1. Two internal dimensions Financial Position [FP]
and Competitive Position [CP]) and
2. Two external dimensions Stability Position [SP]
and Industry Position [IP]).
These four factors are perhaps the most important
determinants of an organization’s overall strategic
position. 6-23](https://image.slidesharecdn.com/chapter2-240523121154-2f96d2e4/85/Chapter-2-3-Strategic-Analysis-choice-ppt-23-320.jpg)
Chapter 2.3 Strategic Analysis &choice.ppt
- 1. Chapter 2.3 Strategy Analysis and Choice 6-1
- 2. A Comprehensive Strategic- Management Model 6-2
- 3. The Process of Generating and Selecting Strategies Nature of Strategy Analysis & Choice Establishing long-term objectives • Generating alternative strategies • Selecting strategies to pursue • Best alternative – achieve mission & objectives 6-3
- 4. Vision Mission Objectives External audit Internal audit Past successful strategies Strategy Analysis & Choice Alternative Strategies Derive From: Ch 7 -4 Copyright © 2011 Pearson Education
- 5. Ch 6 -5 Strategy Analysis & Choice Generating Alternatives • Participation in generating alternative strategies should be as broad as possible • Alternative strategies proposed by participants should be considered, discussed, and ranked in order of attractiveness Ch 7 -5 Copyright © 2011 Pearson Education
- 7. Ch 6 -7 Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: The Matching Stage Stage 3: The Decision Stage Ch 7 -7 Copyright © 2011 Pearson Education
- 8. A Comprehensive Strategy- Formulation Framework Stage 1 - Input Stage summarizes the basic input information needed to formulate strategies consists of the EFE Matrix, the IFE Matrix, and the Competitive Profile Matrix (CPM) 6-8
- 9. Ch 6 -9 Strategy-Formulation Analytical Framework Internal Factor Evaluation Matrix (IFE) External Factor Evaluation Matrix (EFE) Competitive Profile Matrix (CPM) Stage 1: The Input Stage Ch 7 -9 Copyright © 2011 Pearson Education
- 10. A Comprehensive Strategy- Formulation Framework Stage 2 - Matching Stage focuses on generating feasible alternative strategies by aligning key external and internal factors techniques include the Strengths-Weaknesses- Opportunities-Threats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Matrix 6-10
- 11. Ch 6 -11 Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage Ch 7 -11 Copyright © 2011 Pearson Education
- 12. Matching Key External and Internal Factors to Formulate Alternative Strategies 6-12
- 13. SWOT Matrix 1. List the firm’s key external opportunities 2. List the firm’s key external threats 3. List the firm’s key internal strengths 4. List the firm’s key internal weaknesses 5. Match internal strengths with external opportunities 6-13
- 14. The Matching Stage The Strengths-Weaknesses- Opportunities-Threats (SWOT) Matrix helps managers develop four types of strategies: SO (strengths-opportunities) Strategies WO (weaknesses-opportunities) Strategies ST (strengths-threats) Strategies WT (weaknesses-threats) Strategies 6-14
- 15. SO Strategies Use a firm’s internal strengths to take advantage of external opportunities SO Strategies Strengths Weaknesses Opportunities Threats SWOT Ch 7 -15 Copyright © 2011 Pearson Education
- 16. WO Strategies Improving internal weaknesses by taking advantage of external opportunities WO Strategies Strengths Weaknesses Opportunities Threats SWOT Ch 7 -16 Copyright © 2011 Pearson Education
- 17. ST Strategies Use a firm’s strengths to avoid or reduce the impact of external threats ST Strategies Strengths Weaknesses Opportunities Threats SWOT Ch 7 -17 Copyright © 2011 Pearson Education
- 18. WT Strategies Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats WT Strategies Strengths Weaknesses Opportunities Threats SWOT Ch 7 -18 Copyright © 2011 Pearson Education
- 19. SWOT Matrix Strengths – S List Strengths Weaknesses – W List Weaknesses Opportunities – O List Opportunities SO Strategies Use strengths to take advantage of opportunities WO Strategies Overcoming weaknesses by taking advantage of opportunities Threats – T List Threats ST Strategies Use strengths to avoid threats WT Strategies Minimize weaknesses and avoid threats Ch 6 -19 Ch 7 -19 Copyright © 2011 Pearson Education
- 20. Limitations with SWOT Matrix Does not show how to achieve a competitive advantage May lead the firm to overemphasize a single internal or external factor in formulating strategies Ch 7 -20 Copyright © 2011 Pearson Education
- 21. Ch 6 -21 Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage Ch 7 -21 Copyright © 2011 Pearson Education
- 22. Ch 6 -22 SPACE Matrix Strategic Position & Action Evaluation Matrix 4-quadrants indicate whether the most appropriate strategy is: • Aggressive • Conservative • Defensive • Competitive Ch 7 -22 Copyright © 2011 Pearson Education
- 23. SPACE Matrix The axes of the SPACE Matrix represent 1. Two internal dimensions Financial Position [FP] and Competitive Position [CP]) and 2. Two external dimensions Stability Position [SP] and Industry Position [IP]). These four factors are perhaps the most important determinants of an organization’s overall strategic position. 6-23
- 24. Factors That Make Up the SPACE Matrix Axes 6-24
- 25. Factors That Make Up the SPACE Matrix Axes 6-25
- 26. Steps to Develop a SPACE Matrix 1. Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP) 6-26
- 27. Steps to Develop a SPACE Matrix 2. Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the FP and IP dimensions. Assign a numerical value ranging from –1 (best) to –7 (worst) to each of the variables that make up the SP and CP dimensions 6-27
- 28. Steps to Develop a SPACE Matrix 3. Compute an average score for FP, CP, IP, and SP 4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix 5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point 6-28
- 29. Steps to Develop a SPACE Matrix 6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection point This vector reveals the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative 6-29
- 30. 6-30
- 31. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 6-31
- 33. Ch 6 -33 Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage Ch 7 -33 Copyright © 2011 Pearson Education
- 34. The Boston Consulting Group (BCG) Matrix BCG Matrix graphically portrays differences among divisions in terms of relative market share position and industry growth rate 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 6-34
- 36. The BCG Matrix Question marks – Quadrant I Organization must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, or product development) or to sell them 6-36
- 37. Ch 6 -37 BCG Matrix Stars • High relative market share and high growth rate - Best long-run opportunities for growth & profitability • Substantial investment to maintain or strengthen dominant position - Integration strategies, intensive strategies, joint ventures Ch 7 -37 Copyright © 2011 Pearson Education
- 38. Ch 6 -38 BCG Matrix Cash Cows • High relative market share, competes in low-growth industry - Generate cash in excess of their needs - Milked for other purposes • Maintain strong position as long as possible - Product development, concentric diversification - If weakens – retrenchment or divestiture Ch 7 -38 Copyright © 2011 Pearson Education
- 39. Ch 6 -39 BCG Matrix Dogs • Low relative market share, competes in slow or no market growth - Weak internal & external position • Liquidation, divestiture, retrenchment Ch 7 -39 Copyright © 2011 Pearson Education
- 40. The BCG Matrix The major benefit of the BCG Matrix is that it draws attention to the cash flow, investment characteristics, and needs of an organization’s various divisions 6-40
- 41. Ch 6 -41 Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage Ch 7 -41 Copyright © 2011 Pearson Education
- 42. 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 Ch 7 -42 Copyright © 2011 Pearson Education
- 43. The Internal-External (IE) Matrix 6-43
- 44. 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 Ch 7 -44 Copyright © 2011 Pearson Education
- 45. Ch 6 -45 Strategy-Formulation Analytical Framework SPACE Matrix BCG Matrix IE Matrix Stage 2: The Matching Stage SWOT Matrix Grand Strategy Matrix Ch 7 -45 Copyright © 2011 Pearson Education
- 46. The Grand Strategy Matrix Grand Strategy Matrix based on two evaluative dimensions: • competitive position and • market (industry) growth 6-46
- 47. The Grand Strategy Matrix 6-47
- 48. The Grand Strategy Matrix Quadrant I continued concentration on current markets (market penetration and market development) and products (product development) is an appropriate strategy Quadrant II unable to compete effectively need to determine why the firm’s current approach is ineffective and how the company can best change to improve its competitiveness 6-48
- 49. The Grand Strategy Matrix Quadrant III must make some drastic changes quickly to avoid further decline and possible liquidation Extensive cost and asset reduction (retrenchment) should be pursued first Quadrant IV have characteristically high cash-flow levels and limited internal growth needs and often can pursue related or unrelated diversification successfully 6-49