david sm13 ppt_06

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 6 -1

Chapter 6Strategy Analysis & Choice

Strategic Management: Concepts & Cases

13th EditionFred David


Ch 6 -2


Ch 6 -3

“Whether it’s broke or not, fix it – make it better. Not just products, but the whole company if necessary.”– Bill Saporito

Strategy Analysis & Choice

“Life is full of lousy options.” – General P.X. Kelley


Ch 6 -4

Subjective decisions based on objective information

Generating alternative strategies Selecting strategies to pursue Best alternative course of action to achieve

mission & objectives Derived from vision, mission, objectives,

external audit, and internal audit



Ch 6 -5


Generating Alternatives –

Participation in generating alternative strategies should be as broad as possible


Ch 6 -6

Comprehensive Strategy-Formulation Framework Stage 1 - Input Stage

EFE Matrix IFE matrix CPM

Stage 2 - Matching Stage SWOT SPACE matrix BCG matrix IE Matrix Grand strategy matrix

Stage 3 - Decision Stage QSPM


Ch 6 -7

Strategy-Formulation Framework

External Factor EvaluationMatrix (EFE)

Internal Factor EvaluationMatrix (IFE)

Competitive Profile Matrix(CPM)

Stage 1:The Input Stage


Ch 6 -8

Stage 2: The Matching Stage

Match between organization’s internal resources & skills and the opportunities & risks created by its external factors


Ch 6 -9

Strategy-Formulation FrameworkSWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:The Matching Stage


Ch 6 -10

Stage 2: The Matching Stage

StrengthsWeaknessesOpportunitiesThreats

SWOT Matrix


Ch 6 -11

SWOT Matrix

Strengths-Opportunities (SO)Weaknesses-Opportunities (WO)Strengths-Threats (ST)Weaknesses-Threats (WT)

Four Types of Strategies


Ch 6 -12

SWOT Matrix

SO strategies use a firm’s internal strengths to take advantage of external opportunities

WO strategies improve 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 defensive tactics aimed at reducing internal weakness and avoiding external threats


Ch 6 -13

Limitations with SWOT Matrix

Does not show how to achieve a competitive advantage

Provides a static assessment in time May lead the firm to overemphasize a single

internal or external factor in formulating strategies


Ch 6 -14


SPACE Matrix

BCG Matrix

IE Matrix




Ch 6 -15

SPACE MatrixStrategic Position & Action Evaluation Matrix

AggressiveConservativeDefensiveCompetitive


Ch 6 -16

SPACE Matrix

Internal dimensions Financial position (FP) Competitive position (CP)

External dimensions Environmental position (EP) Industry position (IP)


Ch 6 -17


Ch 6 -18


SPACE Matrix

BCG Matrix

IE Matrix




Ch 6 -19

BCG Matrix

Boston Consulting Group MatrixAssists multidivisional firm in formulating strategiesAutonomous divisions = business portfolioDivisions may compete in different industriesFocus on relative market-share position & industry growth rate


Ch 6 -20

BCG Matrix

Question Marks – low relative market share in a high-growth industry

Stars – high relative market share in a high-growth industry

Cash Cows – high relative market share in a low-growth industry

Dogs – Low relative market share in a slow or no growth industry


Ch 6 -21


Ch 6 -22


SPACE Matrix

BCG Matrix

IE Matrix




Ch 6 -23

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 6 -24


Ch 6 -25

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 6 -26


SPACE Matrix

BCG Matrix

IE Matrix




Ch 6 -27


Tool for formulating alternative strategies Based on two dimensions

Competitive position Market growth


Ch 6 -28

Quadrant IV1. Related diversification2. Unrelated diversification3. Joint ventures

Quadrant III1. Retrenchment2. Related diversification3. Unrelated diversification4. Divestiture5. Liquidation

Quadrant I1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Related diversification

Quadrant II1. Market development2. Market penetration3. Product development4. Horizontal integration5. Divestiture6. Liquidation

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAK COMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION


Ch 6 -29


Excellent strategic positionConcentration on current markets/productsTake risks aggressively when necessary

Quadrant I


Ch 6 -30


Evaluate present approachHow to improve competitivenessRapid market growth requires intensive strategy

Quadrant II


Ch 6 -31


Compete in slow-growth industriesWeak competitive positionDrastic changes quicklyCost & asset reduction (retrenchment)

Quadrant III


Ch 6 -32


Strong competitive positionSlow-growth industryDiversification to more promising growth areas

Quadrant IV


Ch 6 -33

Strategy-Formulation Analytical Framework

Stage 3:The Decision Stage

Quantitative StrategicPlanning Matrix

(QSPM)


Ch 6 -34

QSPM

Technique designed to determine the relative attractiveness of feasible alternative actions

Quantitative Strategic Planning Matrix


Ch 6 -35

QSPM

Key Internal FactorsManagementMarketingFinance/AccountingProduction/OperationsResearch and DevelopmentManagement Information Systems

Strategy 3Strategy 2Strategy 1WeightKey External FactorsEconomyPolitical/Legal/GovernmentalSocial/Cultural/Demographic/EnvironmentalTechnologicalCompetitive

Strategic Alternatives


Ch 6 -36

Steps to Develop a QSPM

1. Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column

2. Assign weights to each key external and internal factor


Ch 6 -37

Steps to Develop a QSPM

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

4. Determine the Attractiveness Scores5. Compute the Total Attractiveness Scores6. Compute the Sum Total Attractiveness

Score


Ch 6 -38

QSPM

Sets of strategies considered simultaneously or sequentiallyIntegration of pertinent external & internal factors in the decision-making process

Advantages


Ch 6 -39

QSPM

Requires intuitive judgments & educated assumptionsOnly as good as the prerequisite inputs

Limitations


Ch 6 -40

Cultural Aspects of Strategy Choice

A set of values, beliefs, attitudes, customs, norms, personalities, heroes and heroines that describe a firmSuccessful strategies depend on support of the firm’s culture

Organization Culture


Ch 6 -41

Politics of Strategy Choice

Hierarchy of commandCareer aspirationsAllocation of scarce resources

Politics in Organizations


Ch 6 -42

Politics of Strategy Choice

EquifinalitySatisfyingGeneralizationHigher-order issuesPolitical access on important issues

Political Tactics for Strategists


Ch 6 -43

Governance Issues

Control & oversight over managementAdherence to legal prescriptionsConsideration of stakeholders’ interestsAdvancement of stockholders’ rights

Board of Directors Roles & Responsibilities


Ch 6 -44

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david sm13 ppt_06

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