group 2. chp 6.. strategy analysis and choice

Group Members Farah Amjad 07

Raazia Jarral 22 Um-e-Roman 29 Maham Malik 39 Anam Attique 52

Strategy Analysis & Choice

• Establishing long-term objectives• Generating alternative strategies• Selecting strategies to pursue• Best alternative - achieve mission & objectives

Nature of Strategy Analysis & Choice


• Vision• Mission• Objectives

• External audit• Internal audit

• Past successful strategies


Alternative Strategies Derive From

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 EvaluationMatrix (IFE)

External Factor EvaluationMatrix (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


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 MatrixFour 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 advantageof 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

Key Strategies1. Accelerate product launches by strengthening R and D

team 2. Extend links with key technology centres 3. Raise additional venture capital 4. Expand senior management team in sales/marketing 5. Recruit non-executive directors 6. Strengthen human resources function and introduce

share options for staff 7. Appoint advisers for intellectual property and finance 8. Seek new market segments/applications for products

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

BCG Matrix

Boston Consulting Group MatrixEnhances 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

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BCG MatrixRelative Market Share Position

High1.0

Medium.50

Low0.0

Indu

stry

Sal

es G

row

th R

ate

High+20

Low-20

Medium0

BCG Matrix

Question MarksLow relative market share – compete in high-growth industry

Cash needs are high

Cash generation is low

Decision to strengthen (intensive strategies) or divest

BCG Matrix

StarsHigh 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 CowsHigh 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 possibleProduct development, concentric diversificationIf weakens—retrenchment or divestiture

BCG Matrix

Dogs

Low relative market share & compete in slow or no market growth

Weak internal & external position

Liquidation, divestiture, retrenchment


Tool for formulating alternative strategies

Based on two dimensions

Competitive position

Market growth

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Quadrant IV1. Concentric diversification2. Horizontal diversification3. Conglomerate

diversification4. Joint ventures

Quadrant III1. Retrenchment2. Concentric diversification3. Horizontal diversification4. Conglomerate

diversification5. Liquidation

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

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

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAK COMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION


Excellent strategic position

Concentration on current markets/products

Take risks aggressively when necessary

Which type of strategy would you suggest?

Quadrant I


Evaluate present approach

How to improve competitiveness

Rapid market growth requires intensive strategy

Quadrant II


Compete in slow-growth industries

Weak competitive position

Drastic changes quickly

Cost & asset reduction (retrenchment)

Quadrant III


Strong competitive position

Slow-growth industry

Diversification to more promising growth areas

Quadrant IV


Stage 3:The Decision Stage

Quantitative StrategicPlanning Matrix

(QSPM)

Technique designed to determine the relative attractiveness of feasible alternative actions

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

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

4. Determine the Attractiveness Scores (A.S)5. Compare the Total Attractiveness Scores 6. Compute the Sum Total Attractiveness Score

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QSPM : information from IFE and EFE

Key Internal FactorsManagementMarketingFinance/AccountingProduction/OperationsResearch and DevelopmentComputer Information SystemsSum total A.S.

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

Strategic Alternatives

AS 1 to 4 and blank if factor does not effect strategy: TAS = Weight x AS

QSPM

Requires intuitive judgments & educated assumptions

Only as good as the prerequisite inputs

Limitations

AdvantagesSets of strategies considered simultaneously or sequentially

Integration of pertinent external & internal factors in the decision making process

Example of a QSPM for Dell

Thank You

group 2. chp 6.. strategy analysis and choice

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