Strategic analysis and choice largely involve making subjective decisions based on objective information. This chapter introduces important concepts that can help strategists generate feasible alternatives, evaluate those alternatives, and choose a specific course of action. Behavioural aspects of strategy formulation are described, including politics, culture, ethics, and social responsibility considerations..
THE NATURE OF STRATEGY ANALYSIS AND CHOICE This chapter focuses on establishing long-term objectives, generating alternative strategies, and selecting strategies to pursue. The Process of Generating and Selecting Strategies Strategists never consider all feasible alternative that could benefit the firm , because there are an infinite number of possible actions and an infinite number of ways to implement those actions. Therefore, a manageable set of the most attractive alternative strategies must be developed. Identifying and evaluating alternative strategies should involve many of the managers and employees who earlier assembled the organizational mission statement, performed the external audit and conducted the internal audit. Alternative strategies proposed by participants should be considered and discussed in a meeting or series of meetings..
II. A COMPREHENSIVE STRATEGY-FORMULATION FRAMEWORK Important Strategy-Formulation Techniques Important strategy formulation techniques can be integrated into a three-stage decision-making framework. The tools presented in this framework are applicable to all sizes and types of applicable to all sizes and types of organizations and can help strategists identify, evaluate, and select strategies. The framework described above has three stages: Stage 1: The Input Stage summarizes the basic input information needed to formulate strategies. It consists of the External Factor Evaluation (EFE) Matrix, the Internal Factor Evaluation (IFE) Matrix, and the Competitive Profile Matrix (CPM). Stage 2: The Matching Stage focuses upon generating feasible alternative strategies by aligning 1 and internal factors. It includes the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, Strategic Position and Action Evaluation (SPACE) Matrix, Boston Con Group (BCG) Matrix, Internal-External (IE) Matrix, and Grand Strategy Matrix. Stage 3: The Decision Stage uses the Quantitative Strategic Planning Matrix (QSPM) to the relative attractiveness of alternative strategies. 3. All nine techniques included in the strategy-formulation framework require integration of intuition..
III. THE INPUT STAGE Procedures for developing an EFE Matrix, an IFE Matrix, and a CPM were presented earlier. The input tools require strategists to quantify subjectively during early stages of the strategy-formulation process. Making small decisions in the input matrices regarding the relative importance of external and internal factors allows strategists to generate and evaluate alternative strategies more effectively..
THE SWOT MATRIX The SWOT Matrix is an important matching tool that helps managers develop four types of strategies: SO strategies-use a firm's internal strengths to take advantage of external opportunities. WO strategies-are aimed at improving 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-are defensive tactics directed at reducing internal weaknesses and avoiding external threats.
2. There are eight steps to constructing a SWOT Matrix: a. List the firm's key external opportunities. b. List the firm's key external threats. c. List the firm's key internal strengths. d. List the firm's key internal weaknesses. e. Match internal strengths with external opportunities and record the resulting SO strategies in the appropriate cell. f. Match internal weaknesses with external opportunities and record the resulting WO strategies. g. Match internal strengths with external threats and record the resultant ST strategies. h. Match internal weaknesses with external threats and record the resulting WT strategies. 3. Although the SWOT matrix is widely used in strategic planning, the analysis does have some limitations. a. SWOT does not show how to achieve a competitive advantage. b. A SWOT matrix is a static assess C. SWOT analysis may lead to the firm to overemphasize certain internal or external factors.
THE SPACE MATRIX The SPACE Matrix is another important Stage 2 matching tool. Its four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are more appropriate for a given organization. The axes of a space matrix represent two internal dimensions (financial position and competitive position), and two external dimensions (stability position and industry position) Depending on the type of organization, numerous variables could make up each of the dimensions represented on the axes of the SPACE Matrix..
2. The steps to develop a SPACE Matrix include: Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP). Assign a numerical value ranging from +1 (worst) to +7 (best) for the variables that make up the FP and IP dimensions. Assign a number between-1 (best) to-7 (worst) for variables that make up the SP and CP dimensions. On the FP and CP axes, make comparison to competitors. On the IP and SP axes, make comparison to other industries. Compute an average score for FP, CP, IP, and SP by summing the values given to the variables and dividing by the number of variables included in each dimension. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix. e. 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. 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..
The SPACE Matrix and its implications – Suraz Syangden.
THE BCG MATRIX Autonomous divisions (or profit centers) of an organization make up what is called a business portfolio. The BCG Matrix graphically portrays differences among divisions (of a firm) in terms of relative market share position and industry growth rate. 4 There are reasons which identify whether to disclose or not disclose financial information by division. Divisions in the respective circles in the BCG Matrix are called Question Marks, Stars, Cash Cows, and Dogs. The four quadrants represent the following: Question Marks-Divisions in Quadrant I have a low relative market share position, yet compete in a high-growth industry. Generally, these firms' cash needs are high and their cash generation is low. Stars Quadrant II businesses represent the organization's best long-run opportunities for growth and profitability. These businesses have a high relative market share and compete in high growth rate industries. Cash Cows-Divisions positioned in Quadrant III have a high relative market position, but compete in a low-growth industry. They are called Cash Cows because they generate cash in excess of their needs. Dogs-Quadrant IV divisions of the organization have a low relative market share position and compete in a slowed or no-growth industry; they are Dogs in a firm's portfolio..
The BCG Matrix: How to Strategically Improve Your Product Portfolio.
THE IE MATRIX The IE Matrix positions an organization's various divisions in a nine-cell display. The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organization divisions in a schematic diagram; this is why they are called portfolio matrices. Differences between the IE Matrix and the BCG Matrix: Axes are different. IE Matrix requires more information about divisions than BCG. c. Strategic implications of each matrix are different. The IE Matrix is based on two key dimensions: the IFE total weighted scores on the x-axis and the EFE total weighted scores on the y-axis. The IE Matrix can be divided into three major regions, as shown in Figure 6-11: a. Divisions 1, 2, and 3 can be described as grow and build. b. Divisions IV is a candidate for harvest or divest. c. Divisions VI, VIII, or IX should use harvest or divest strategies. The IE Matrix has five product segments. Division I has the largest revenues and the largest profits in the matrix..
refer chapter 6 David, develop an ie matrix for | Chegg.com.
THE GRAND STRATEGY MATRIX In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy Matrix has become a popular tool for formulating alternative strategies. All organizations can be positioned in one of the Grand Strategy Matrix's four strategy quadrants. It is based on two evaluative dimensions: competitive position and market growth. Firms located in Quadrant I of the Grand Strategy Matrix are in excellent strategic position. Firms positioned in Quadrant II need to evaluate their present approach to the marketplace. Quadrant III organizations compete in slow-growth industries and have weak competitors. Quadrant IV businesses have strong competitive position but are in a slow growth industry..
THE GRAND STRATEGY MATRIX | travel-agency.
V. THE DECISION STAGE A. The Quantitative Strategic Planning Matrix (QSPM) Other than ranking strategies to achieve the prioritized list, there is only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions. This technique is the QSPM, which comprises Stage 3 of the strategy-formulation analytical framework. This technique objectively indicates which alternative strategies are best. In the basic format of the QSPM, the left column consists of key external and internal factors, and the top row consists of feasible alternative strategies. Six steps to developing a QSPM: a. Make a list of the firm's key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM. b. Assign weights to each key external and internal factor. c. Examine the Stage 2 matrices and identify alternative strategies that the organization should consider implementing. d. Determine the Attractiveness Scores (AS). e. Compute the total AS. f. Compute the sum Total..
Positive Features and Limitations of the QSPM A positive feature of the QSPM is that sets of strategies can be examined sequentially of simultaneously. Another positive feature of the QSPM is that it requires strategists to integrate pertinent external and internal factors into the decision process. Developing a QSPM makes it less likely that key factors will be overlooked or weighted inappropriately. 2. The QSPM is not without some limitations. First, it always requires intuitive judgment. Second, it can only be as good as the prerequisite information and matching analyses upon which it is based..