Chapter 6 strategic analysis and choice.ppt

-- Establishing long-term objectives
-- Generating alternative strategies
-- Selecting strategies to pursue
-- Best alternative - achieve mission & objectives
Nature of Strategy Analysis & Choice
Chapter 5: Strategy Analysis
& Choice

• Vision
• Mission
• Objectives
• External audit
• Internal audit
• Past successful strategies
Strategy Analysis & Choice
Alternative Strategies Derive From --

• There are different tools
 SWOT Matrix,
BCG Matrix
 Grand Strategy Matrix
 Quantitative Strategic Planning Matrix
(QSPM)
• The most two popular tool for formulating alternative
strategies.
SWOT Matrix,
BCG Matrix
Tool for formulating alternative strategies.

Comprehensive Strategy-Formulation
Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage

Strategy-Formulation Analytical
Framework
Internal Factor Evaluation
Matrix (IFE)
External Factor Evaluation
Matrix (EFE)
Stage 1:
The Input Stage
Competitive Profile Matrix
(CPM)
Note: EFE and CPM form external and IFE from internal (assessment)

Stage 1: The Input Stage…
Basic input information for the matching & decision stage
matrices
Requires strategists to quantify subjectivity early in the
process
Good intuitive judgment always needed

Strategy-Formulation Analytical Framework
SWOT Matrix
BCG Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage

Stage 2: The Matching Stage
Match between organization’s internal resources & skills and the
opportunities & risks created by its external factors
E.g.
 internal: strong R and D function
 External: changing demographics (population
getting older)
Strategy: ?
 Develop new products for older adults (related to long
term objectives financial or strategic)

Stage 2: The Matching Stage: SWOT Matrix
Four Types of Strategies
Strengths-Opportunities (SO):
Use a firm’s internal strengths to take advantage of external
opportunities
Weaknesses-Opportunities (WO):
Improving internal weaknesses by taking advantage
of external opportunities
Strengths-Threats (ST):
Use a firm’s strengths to avoid or reduce the impact of external
threats.
Weaknesses-Threats (WT):
Defensive tactics aimed at reducing internal weaknesses and
avoiding external threats

SWOT Matrix
Leave Blank
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

BCG Matrix
Boston Consulting Group Matrix
Enhances multi-divisional firm in formulating strategies
Autonomous divisions = business portfolio
Divisions may compete in different industries
Focus on market-share position & industry growth rate

BCG Matrix
Relative Market Share Position
Ratio of a division’s own market
share in an industry to the market
share held by the largest rival firm
in that industry

The BCG Matrix
Relative Market Share Position in the Industry
High +20
Medium 0
Low -20
High Medium
Low
1.0 .50 0.0
Question Marks (I)
Dogs (IV)
Stars (II)
Cash Cows (III)
?
Class activity
Which type of
strategy would you
suggest?

BCG Matrix
Question Marks
With Low relative market share – compete in
high-growth industry
Cash needs are high
Cash generation is low
What alternative of strategy is important?
Decision to strengthen (intensive strategies)
or divest

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
.

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

BCG Matrix
Dogs
Low relative market share & compete in slow or no market
growth
Weak internal & external position
Alternative Strategies
retrenchment ,
divestiture,
Liquidation

Strategy-Formulation Analytical
Framework
Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix
(QSPM)
Technique designed to determine the relative
attractiveness of feasible alternative actions

QSPM : information from IFE and
EFE
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Computer Information
Systems
Sum total A.S.
Strategy 3
Strategy 2
Strategy 1
Weight
Key External Factors
Economy
Political/Legal/Governmental
Social/Cultural/
Demographic/Environmental
Technological
Competitive
Strategic Alternatives
AS 1 to 4 and blank if factor does not effect strategy: TAS = Weight x AS

Chapter 6 strategic analysis and choice.ppt

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