L 6 internal environment
- 2. Analyzing a Company’s Resources & Competitive Position
- 3. 1. How well is the company’s present strategy working? 2. What are the company’s resource strengths and weaknesses and its external opportunities and threats? 3. Are the company’s prices and costs competitive? 4. Is the company competitively stronger or weaker than key rivals? 5. What strategic issues merit front-burner managerial attention? Company Situation Analysis: The Key Questions
- 4. Identifying the Components of a Single-Business Company’s Strategy
- 5. Question 1: How Well Is the Company’s Present Strategy Working? • Must begin by understanding what the strategy is • Identify competitive approach • Low-cost leadership • Differentiation • Focus on a particular market niche • Determine competitive scope • Broad or narrow geographic market coverage? • In how many stages of industry’s production/distribution chain does the company operate? • Examine recent strategic moves • Identify functional strategies Key Considerations
- 6. • Qualitative assessment – Is the strategy well- conceived? • Covers all the bases? • Internally consistent? • Makes sense? • Timely and in step with marketplace? • Quantitative assessment – What are the results? • Is company achieving its financial and strategic objectives? • Is company an above- average industry performer? Approaches to Assess How Well the Present Strategy Is Working
- 7. • Trend in sales and market share • Acquiring and/or retaining customers • Trend in profit margins • Trend in net profits, ROI, and EVA • Overall financial strength and credit ranking • Efforts at continuous improvement activities • Trend in stock price and stockholder value • Image and reputation with customers • Leadership role(s) – Technology, quality, innovation, e-commerce, etc. Key Indicators of How Well the Strategy Is Working
- 10. • S W O T represents the first letter in • S trengths • W eaknesses • O pportunities • T hreats • For a company’s strategy to be well-conceived, it must be • Matched to its resource strengths and weaknesses • Aimed at capturing its best market opportunities and erecting defenses against external threats to its well-being S W O T Question 2: What Are the Company’s Strengths, Weaknesses, Opportunities and Threats ?
- 11. • A strength is something a firm does well or an attribute that enhances its competitiveness • Valuable skills, competencies, or capabilities • Valuable physical assets • Valuable human assets • Valuable organizational assets • Valuable intangible assets • Important competitive capabilities • An attribute placing a company in a position of market advantage • Alliances or cooperative ventures with partners Resource strengths and competitive capabilities are competitive assets! Identifying Resource Strengths and Competitive Capabilities
- 12. Competencies vs. Core Competencies vs. Distinctive Competencies • A competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity • A core competence is a well-performed internal activity central (not peripheral or incidental) to a company’s competitiveness and profitability • A distinctive competence is a competitively valuable activity a company performs better than its rivals
- 13. Identifying Resource Weaknesses and Competitive Deficiencies • A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage • Resource weaknesses relate to • Inferior or unproven skills, expertise, or intellectual capital • Lack of important physical, organizational, or intangible assets • Missing capabilities in key areas Resource weaknesses and deficiencies are competitive liabilities!
- 16. Identifying a Company’s Market Opportunities • Opportunities most relevant to a company are those offering • Good match with its financial and organizational resource capabilities • Best prospects for profitable long-term growth • Potential for competitive advantage
- 17. Identifying External Threats • Emergence of cheaper/better technologies • Introduction of better products by rivals • Entry of lower-cost foreign competitors • Onerous regulations • Rise in interest rates • Potential of a hostile takeover • Unfavorable demographic shifts • Adverse shifts in foreign exchange rates • Political upheaval in a country
- 18. The Three Steps of SWOT Analysis
- 19. • Assessing whether a firm’s costs are competitive with those of rivals is a crucial part of company situation analysis • Key analytical tools • Value chain analysis • Benchmarking Question 3: Are the Company’s Prices and Costs Competitive?
- 20. • A company’s business consists of all activities undertaken in designing, producing, marketing, delivering, and supporting its product or service • All these activities that a company performs internally combine to form a value chain—so-called because the underlying intent of a company’s activities is to do things that ultimately create value for buyers • The value chain contains two types of activities • Primary activities (where most of the value for customers is created) • Support activities that facilitate performance of the primary activities Concept: Company Value Chain
- 21. A Representative Company Value Chain
- 22. Representative Value Chain for an Entire Industry
- 23. Developing Data to Measure a Company’s Cost Competitiveness • After identifying key value chain activities, the next step involves determining costs of performing specific value chain activities using activity-based costing • Appropriate degree of disaggregation depends on • Economics of activities • Value of comparing narrowly defined versus broadly defined activities • Guideline – Develop separate cost estimates for activities • Having different economics • Representing a significant or growing proportion of costs
- 24. • Determining whether a company’s costs are in line with those of rivals requires • Measuring how a company’s costs compare with those of rivals activity-by-activity • Requires having accounting data to measure cost of each value chain activity • Activity-based costing entails • Defining expense categories according to specific activities performed and • Assigning costs to the activity responsible for creating the cost Activity-Based Costing: A Key Tool in Analyzing Costs
- 26. • Focuses on cross-company comparisons of how certain activities are performed and costs associated with these activities • Purchase of materials • Payment of suppliers • Management of inventories • Getting new products to market • Performance of quality control • Filling and shipping of customer orders • Training of employees • Processing of payrolls Benchmarking Costs of Key Value Chain Activities
- 27. Translating Company Performance of Value Chain Activities into Competitive Advantage
- 28. • Overall competitive position involves answering two questions • How does a company rank relative to competitors on each important factor that determines market success? • Does a company have a net competitive advantage or disadvantage vis-à-vis major competitors? Question 4: Is the Company Stronger or Weaker than Key Rivals?
- 29. 1. List industry key success factors and other relevant measures of competitive strength 2. Rate firm and key rivals on each factor using rating scale of 1 to 10 (1 = very weak; 5 = average; 10 = very strong) 3. Decide whether to use a weighted or unweighted rating system (a weighted system is superior because chosen strength measures are unlikely to be equally important) 4. Sum individual ratings to get an overall measure of competitive strength for each rival 5. Based on overall strength ratings, determine overall competitive position of firm Assessing a Company’s Competitive Strength vs. Key Rivals
- 32. • Based on results of both industry and competitive analysis and an evaluation of a company’s competitiveness, what items should be on a company’s “worry list”? • Requires thinking strategically about • Pluses and minuses in the industry and competitive situation • Company’s resource strengths and weaknesses and attractiveness of its competitive position A “good” strategy must address “what to do” about each and every strategic issue! Question 5: What Strategic Issues Merit Managerial Attention?
- 33. SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats
- 34. What is a SWOT analysis and why should you use one? A SWOT analysis guides you to identify the positives and negatives inside your organization (Strength & Weakness) and outside of it, in the external environment (Opportunity & Threat). Developing a full awareness of your situation can help with both strategic planning and decision -making.
- 35. When do you use SWOT? You might use it to: • Explore possibilities to problems. • Make decisions for your initiative. • Determine where change is possible. • Adjust and refine plans mid-course.
- 36. What are the elements of a SWOT analysis?
- 37. A SWOT analysis focuses on Strengths, Weaknesses, Opportunities, and Threats. Ask participants to answer these simple questions: what are the strengths and weaknesses of your group, community, or effort, and what are the opportunities and threats facing it?
- 38. If a looser structure helps you brainstorm, you can group positives and negatives to think broadly about your organization and its external environment.
- 39. Below is a third option for structuring your SWOT analysis, which may be appropriate for a larger initiative that requires detailed planning. This "TOWS Matrix" is adapted from Fred David's Strategic Management text.
- 40. David gives an example for Campbell Soup Company that stresses financial goals, but it also illustrates how you can pair the items within a SWOT grid to develop strategies. (This version of the chart is abbreviated.)
- 41. Listing Your Internal Factors: Strengths and Weaknesses (S, W) General areas to consider • Human resources - staff, volunteers, board members, target population • Physical resources - your location, building, equipment • Financial - grants, funding agencies, other sources of income • Activities and processes - programs you run, systems you employ • Past experiences - building blocks for learning and success, your reputation in the community
- 42. Listing External Factors: Opportunities and Threats (O, T) Forces and facts that your group does not control include • Future trends in your field or the culture • The economy - local, national, or international • Funding sources - foundations, donors, legislatures • Demographics - changes in the age, race, gender, culture of those you serve or in your area • The physical environment (Is your building in a growing part of town? Is the bus company cutting routes?) • Legislation (Do new federal requirements make your job harder...or easier?) • Local, national or international events
- 43. How do you create a SWOT analysis? • Who develops the SWOT? • When and where do you develop a SWOT analysis? • How do you develop a SWOT analysis?
- 44. Steps for conducting a SWOT analysis: • Designate a leader or group facilitator. • Designate a recorder to back up the leader if your group is large. • Introduce the SWOT method and its purpose in your organization. • Let all participants introduce themselves. • Have each group designate a recorder; direct them to create a SWOT analysis. • Reconvene the group at the agreed-upon time to share results. • Discuss and record the results. • Prepare a written summary of the SWOT analysis to give to participants.
- 45. How do you use your SWOT analysis? Use it to: • Identify the issues or problems you intend to change. • Set or reaffirm goals. • Create an action plan.
- 46. IFE Matrix
- 47. WhatistheIFE Matrix? • Internal Factor Evaluation Matrix • A summary step in conducting internal strategic management audit. • Summarizes and evaluates the major strengths and weaknesses in the functional areas of a business.
- 48. Components • Internal Factors – list of all strengths and weaknesses • Weights – Scale of 0 to 1 • Rating – Scale of 1 to 4 – Strengths – 4-major strength; 3- minor strength – Weaknesses – 1-major weakness; 2-minor weakness • Total Weighted Score
- 49. ConstructionofIFE Matrix • Make a table. In the first column, list down all the strengths and weaknesses. • In the second column, assign weights to each factor ranging from 0.0 (not important) to 1 (most important). • The sum of all weights must be equal to 1.
- 50. ConstructionofIFE Matrix • In the third column, rate each factor ranging from 1 to 4 (where: 1 = major weakness, 2 = minor weakness, 3 = minor strength, 4 = major strength.)
- 51. ConstructionofIFE Matrix • In the fourth column, calculate weighted score by multiplying each factor’s score by its rating. • Find the total weighted score by adding the weighted scores for each variable.
- 54. WhatisRBV? • The resource-based view focuses on internal resources, the firm's strengths positional or environmental models and weaknesses, in contrast to the of competitive advantage which focuses on opportunities and threats. (Barney, 1991)
- 55. TheLanguageofResourcesand Capabilities Resources Inputs into a firm’s production process Capability capacity of an integrated set of resources to integratively perform a task or activity
- 56. Rents A surplus of revenue over cost. Strategic Assets/Core Competencies Resources and capabilities that can earn rents.
- 57. Typesof Resources Tangible Resources – include all plant and equipment, location, technology, raw materials and machines Intangible employees, Resources - include all training, experience, intelligence, knowledge, skills, abilities Organizational Resources - include firm structure, planning processes, information systems, trademarks, copyrights, databases.
- 58. Resources and capabilities lead to Competitive Advantage when they are: Valuable allow the firm to exploit opportunities or neutralize threats in its external environment. Rare possessed by few, if any, current and potential competitors
- 59. Costly to imitate when other firms either cannot obtain them at a much higher cost Non-substitutable the firm must be organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage
- 62. 62 Strategy Analysis & Choice “Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. But quantification alone is not planning. Some of the most important issues in strategic management cannot be quantified at all.” —Peter Drucker—
- 63. 63 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—
- 64. 64 Strategy Analysis & Choice “Planning is often doomed before it ever starts, either because too much is expected of it or because not enough is put into it.” —T. J. Cartwright—
- 65. 65 Strategy Analysis & Choice Strategic Analysis and Choice: Making subjective decisions based on objective information
- 66. 66 Strategy Analysis & Choice Strategic Analysis and Choice: • Generate feasible alternatives • Evaluate alternatives • Select specific course of action
- 67. 67 Strategy Analysis & Choice Generating & Selecting Strategies Develop set of most attractive alternative strategies Determine for the set • Advantages • Disadvantages • Trade-offs • Costs • Benefits
- 68. 68 Strategy Analysis & Choice Generating & Selecting Strategies Involve a broad mix of personnel • Representation from each department/function • Provides opportunity to gain understanding of firm’s direction • Provides vehicle to develop commitment to attainment of organizational objectives
- 69. Boston Consulting Group Matrix (BCG) • Developed by the Boston Consulting Group (BCG), the BCG Growth Share Matrix is a popular approach to product portfolio planning. • The matrix is defined by two factors: relative market share (the company's market share relative to the competition) and market growth. • To use the matrix, place each individual product in your company's portfolio into one of the four quadrants and then do the same for your competitors' products. • The result has implications for brand positioning and market share.
- 70. 70 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Enhances multidivisional firms’ efforts to formulate strategies • Autonomous divisions (or profit centers) constitute the business portfolio • Firm’s divisions may compete in different industries requiring separate strategy
- 71. 71 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Graphically portrays differences among divisions • Focuses on market share position and industry growth rate • Manage business portfolio through relative market share position and industry growth rate
- 72. 72 Strategy Analysis & Choice Boston Consulting Group Matrix (BCG) • Relative market share position defined: Ratio of a division’s own market share in a particular industry to the market share held by the largest rival firm in that industry.
- 73. 73 BCG Matrix Dogs IV Cash Cows III Question Marks I Stars II Relative Market Share Position High 1.0 Medium .50 Low 0.0 IndustrySalesGrowthRate High +20 Low -20 Medium 0
- 74. 74 Strategy Analysis & Choice BCG Matrix The matrix has four distinct quadrants: • Question Marks • Stars • Cash Cows • Dogs
- 75. 75 Strategy Analysis & Choice BCG Matrix • Question Marks (sometimes called wildcats) Low relative market share position yet compete in high-growth industry. Cash needs are high Cash generation is low Decision to strengthen (intensive strategies) or divest Question marks are difficult to turn into stars because the cost of acquiring market share compounds the cash needs. They may be big winners if backed to the limit, but most often, they fail to develop a leading market position before growth slows and become dogs.
- 76. 76 Strategy Analysis & Choice BCG Matrix • Stars High relative market share and high industry growth rate. Best long-run opportunities for growth and profitability Stars tend to generate strong revenues. Substantial investment to maintain or strengthen dominant position Integration strategies, intensive strategies, joint ventures Over time, as growth slows, stars become cash cows if they hold their market share and dogs if they don't.
- 77. 77 Strategy Analysis & Choice BCG Matrix • Cash Cows High relative market share position, but compete in low-growth industry Generate cash in excess of their needs The more the company invests in cash cows, the greater the return. Cash cows tend to pay the dividends, the interest on debt and cover the corporate overhead. Maintain strong position as long as possible Product development, concentric diversification If becomes weak—retrenchment or divestiture
- 78. 78 Strategy Analysis & Choice BCG Matrix • Dogs Low relative market share position and compete in slow or no market growth Weak internal and external position Dogs often report a profit even though they are net cash users. They are essentially cash traps. Decision to liquidate, divest, retrenchment
- 79. 79 Strategy Analysis & Choice BCG Matrix • The purpose of this tool is to help you balance your product portfolio. • Ideally, you would eliminate any dogs, while keeping the others in a kind of dynamic equilibrium. • The cash generated by cash cows can then be used to turn question marks into stars, which, in turn, may become cash cows. • As noted above, many of the question marks will become dogs, which means you'll need to compensate for these failures by improving margins on the stars and cash cows. • One of the underlying assumptions of this model is that higher rates of profit are directly related to high market share. This isn't always the case.
- 81. GE Nine Cell Planning Grid • General Electric developed with the help of the consulting firm McKinsey and Company, an adaptation of the BCG approach that attempts to overcome some of the matrix limitations. • The GE grid uses multiple factors to assess industry attractiveness and business strength.
- 82. GE Nine Cell Planning Grid • The GE/McKinsey Matrix improves on the BCG approach in two ways: 1) it utilizes more comprehensive axes (the BCG matrix uses market growth rate as a proxy for industry attractiveness and relative market share as a proxy for the strength of the business unit); and 2) it consists of nine-cells rather than four, allowing for greater precision.
- 83. Industry Attractiveness Factors • Market size and projected growth • Intensity of competition • Emerging opportunities and threats • Seasonal and cyclical factors • Resource requirements • Cross-industry strategic fits and resource fits with present businesses • Industry profitability • Social, political, regulatory, and environmental factors • Degree of risk and uncertainty
- 84. Procedure: Rating the Relative Attractiveness of Each Industry Step 1: Select industry attractiveness factors Step 2: Assign weights to each factor (sum of weights = 1.0) Step 3: Rate each industry on each factor (use scale of 1 to 10) Step 4: Calculate weighted ratings; sum to get an overall industry attractiveness rating for each industry
- 85. Example: Rating Industry Attractiveness Rating Scale: 1 = Very unattractive; 5 = Average; 10 = Very attractive 4 2 5 0.20 0.20 0.50 5.80 0.05 0.10 0.10 1.00 5 7 6 0.75 1.05 0.60 0.15 0.15 0.10 Attractiveness Rating 5 8 Weighted Industry Rating 0.50 2.00 Weight 0.10 0.25 Industry Attractiveness Factor Market size and projected growth Intensity of competition Strategic fits and resource fits with other industries in portfolio Resource requirements Emerging industry opportunities and threats Seasonal and cyclical influences Social, political, regulatory, and environmental factors Industry uncertainty and business risk Sum of weights Industry attractiveness rating
- 86. Attractiveness of Mix of Industries as a Whole • How appealing is the whole group of industries in which the company is invested? • Is the company in too many relatively unattractive industries? • Does the portfolio of industries hold promise for attractive growth and profitability? • Should some form of portfolio restructuring be considered?
- 87. Evaluate Each Business Unit’s Competitive Strength •Objectives • Determine how well each business is positioned in its industry relative to rivals • Evaluate whether it is or can be competitively strong enough to contend for market leadership
- 88. Factors to Use in Evaluating Competitive Strength • Relative market share • Costs relative to competitors • Ability to match/beat rivals on key product attributes • Ability to exercise bargaining leverage with key suppliers or customers • Caliber of alliances and collaborative partnerships • Ability to benefit from strategic fits with sister businesses • Technology and innovation capabilities • How well business’s competencies match industry KSFs • Brand name recognition and reputation • Profitability relative to competitors
- 89. Procedure: Rating the Competitive Strength of Each Business Step 1: Select competitive strength factors Step 2: Assign weights to each factor (sum of weights = 1.0) Step 3: Rate each business on each factor (use scale of 1 to 10) Step 4: Calculate weighted ratings; sum to get an overall strength rating for each business
- 90. Example: Rating a Business Unit’s Competitive Strength 4 7 5 0.40 0.70 0.50 6.30 0.10 0.10 0.10 1.00 7 6 7 0.70 0.60 1.05 0.10 0.10 0.15 Strength Rating 5 8 Weighted Strength Rating 0.75 1.60 Weight 0.15 0.20 Competitive Strength Measure Relative market share Costs relative to competitors Ability to match rivals on key product attributes Bargaining leverage Strategic fit relationships Technology and innovation capabilities How well resources match KSFs Degree of profit relative to rivals Sum of weights Competitive strength rating Rating Scale: 1 = Very weak ; 5 = Average; 10 = Very strong
- 91. Using a Matrix to Display Industry Attractiveness and Competitive Strength • Use quantitative measures of industry attractiveness and business strength to plot location of each business in matrix • Each business unit appears as a circle • Area of circle is proportional to size of business as a percent of company revenues • Or area of circle can represent relative size of industry with pie slice showing the company’s market share
- 92. Industry Attractiveness-Competitive Strength Matrix Low High Medium AverageStrong Weak 6.7 3.3 10.0 1.0 1.03.36.7 High priority for investment Medium priority for investment Low priority for investment Business Unit Competitive Strength
- 93. Strategy Implications of Attractiveness/Strength Matrix • Businesses in upper left corner • Accorded top investment priority • Strategic prescription - grow and build • Businesses in three diagonal cells • Given medium investment priority • Invest to maintain position • Businesses in lower right corner • Candidates for harvesting or divestiture • May, on occasion, be candidates for an overhaul and reposition strategy
- 94. Appeal of the Attractiveness/Strength Matrix • Incorporates a wide variety of strategically relevant variables • Stresses concentrating corporate resources in businesses that enjoy • High degree of industry attractiveness and • High degree of competitive strength • The lesson here is emphasize businesses that are market leaders or that can contend for market leadership
- 95. GE Nine Cell Planning Grid • The sample diagram shows the relative position of an SBU with a market share of 65%. The arrow in the upward right position indicates that the SBU is expected to lose strength relative to competitors, and the that the business unit is in an industry that is projected to become increasingly less attractive. The tip of the arrow indicates the future position of the center point of the circle. • Both axes are divided into three segments, yielding nine cells. The nine cells are grouped into three zones:
- 96. GE Nine Cell Planning Grid • The Green Zone • The Green Zone consists of the three cells in the upper left corner. If the SBU falls in this zone, it’s in a favorable position with relatively attractive growth opportunities. This position indicates a "green light" to invest and grow this SBU.
- 97. GE Nine Cell Planning Grid • The Yellow Zone • The Yellow Zone consists of the three diagonal cells from the lower left to the upper right. A position in the yellow zone is viewed as having medium attractiveness. Management must therefore exercise caution when making additional investments in this SBU. The suggested strategy is to protect or allocate resources on a selective basis rather than growing or reducing share.
- 98. GE Nine Cell Planning Grid • The Red Zone • The Red Zone consists of the three cells in the lower right corner. A harvest strategy should be used in the two cells just below the three-cell diagonal. These SBUs shouldn’t receive substantial new resources. The SBUs in the lower right cell shouldn’t receive any resources and should probably be divested or eliminated from a firm’s portfolio.
- 99. GE Nine Cell Planning Grid • There are strategy variations within these three groups. For example, within the Red Zone, a firm would be inclined to quickly divest itself of a weak business in an unattractive industry, whereas it might perform a phased harvest of an average SBU in the same industry. • While the GE/McKinsey Matrix represents an improvement over the relatively simplistic BCG Growth-Share Matrix, it still encompasses a limited view of the competitive landscape. • The matrix doesn’t take into account interactions among SBUs or the core competencies that lead to value creation. • For these and other reasons, some believe the matrix is better suited for providing an overview of the current market rather than serving as a resource allocation tool.
- 101. 101 Strategy Analysis & Choice STRATEGIC ANALYSIS AT THE BUSINESS UNIT LEVEL
- 102. 102 Matching Key Factors Resultant StrategyKey External FactorKey Internal Factor Develop a new employee benefits package =Strong union activity (threat) + Poor employee morale (weakness) Develop new products for older adults = Decreasing numbers of young adults (threat) +Strong R&D (strength) Pursue horizontal integration by buying competitor's facilities = Exit of two major foreign competitors form the industry (opportunity) + Insufficient capacity (weakness) Acquire Visioncable, Inc.= 20% annual growth in the cablevision industry (opportunity) + Excess working capacity (strength)
- 103. 103 Four Types of Strategies WT Strategies ST Strategies WO Strategies SO Strategies Threats Opportunities Weaknesses Strengths (TOWS)
- 104. TOWS Matrix • The nine-cell TOWS matrix is a more flexible version of the traditional four-cell matrix. • The main advantage of this version is that, in addition to identifying major strengths, weaknesses, opportunities and threats, it incorporates potential strategies for improving the company's competitive position.
- 105. TOWS Matrix • There are four steps to developing this matrix: 1. Complete the S-W-O-T boxes as you would in a traditional SWOT exercise, prioritizing your entries after you've generated an exhaustive list.
- 106. TOWS Matrix o Strengths: List company-specific internal strengths that bolster the company's competitive position. o Weaknesses: List company-specific internal weaknesses that hurt the company's competitive position. o Opportunities: List external opportunities available to the company and/or its competitors. o Threats: List external threats the company and/or its competitors must face.
- 107. TOWS Matrix 3. Explain the potential strategies developed in the previous step in terms of three response options: prospect, defend or harvest. This requires you 1) determine the relative magnitude of your various SWOT entries and 2) develop logically feasible matches between internal and external factors. 4. Recommend the best strategies to company decision makers.
- 108. 108 TOWS Matrix WT Strategies Minimize weaknesses and avoid threats ST Strategies Use strengths to avoid threats Threats-T List Threats WO Strategies Overcome weaknesses by taking advantage of opportunities SO Strategies Use strengths to take advantage of opportunities Opportunities-O List Opportunities Weaknesses-W List Weaknesses Strengths-S List Strengths Leave Blank
- 109. 109 TOWS Matrix Response Option Potential Actions Prospect o Develop new distinguishing competency o Initiate R&D in new technology o Learn new manufacturing process o Learn how to design and promote new product Defend o Preserve existing distinguishing competency o Reduce price of existing product o Increase price of existing product o Intensify R&D in existing technology Harvest o Gradually dissolve the business o Increase promotion of existing product o Reduce expenditures for existing product
- 110. 110 Strategy Analysis & Choice Grand Strategy Matrix • Popular tool for formulating alternative strategies • Based on two evaluative dimensions Competitive position Market growth
- 111. 111 Grand Strategy Matrix Quadrant IV • Concentric diversification • Horizontal diversification • Conglomerate diversification • Joint ventures Quadrant III • Retrenchment • Concentric diversification • Horizontal diversification • Conglomerate diversification • Liquidation Quadrant I • Market development • Market penetration • Product development • Forward integration • Backward integration • Horizontal integration • Concentric diversification Quadrant II • Market development • Market penetration • Product development • Horizontal integration • Divestiture • Liquidation RAPID MARKET GROWTH SLOW MARKET GROWTH WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION
- 112. 112 Strategy Analysis & Choice Grand Strategy Matrix • Quadrant I Excellent strategic position Concentration on current markets and products Take risks aggressively when necessary
- 113. 113 Strategy Analysis & Choice Grand Strategy Matrix • Quadrant II Evaluate present approach seriously How to change to improve competitiveness Rapid market growth requires intensive strategy
- 114. 114 Strategy Analysis & Choice Grand Strategy Matrix • Quadrant III Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost and asset reduction indicated (retrenchment)
- 115. 115 Strategy Analysis & Choice Grand Strategy Matrix • Quadrant IV Strong competitive position Slow-growth industry Diversification indicated to more promising growth areas