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8/14/2019 Tahir Presentation

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Strategy-Formulation Analytical

FrameworkSWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:The Matching Stage


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SPACE Matrix

Strategic Position & Action Evaluation Matrix

Aggressive

Conservative

Defensive

Competitive


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SPACE Matrix

Two Internal Dimensions

Financial Strength (FS)Competitive Advantage (CA)


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SPACE Matrix

Two External Dimensions

Environmental Stability (ES)Industry Strength (IS)


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5

SPACE Factors

Competitive advantage (CA)

Market share -5.0Product quality -1.0

Customer loyalty -1.0

Technology -1.0

Control over supplier & distributor-2.0

Financial Strength (FS)

Return on investment 5.0

Leverage 3.0

Liquidity 4.0

Working capital 3.0

3 years income 5.0

internal Strategic PositionInternal Strategic Position


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6

SPACE Factors

Industry Strength (IS)

Growth potential 4.0

Profit potential4.0

Financial stability 5.0

Labor cost 3.0

Ease of entry into market 2.0

Environmental Stability (ES)

Technological changes -5.0

Rate of inflation -2.0

Barriers to entry -2.0Competitive pressure -6.0

Price elasticity of demand -2.0

External Strategic Positionexternal Strategic Position


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Steps to Developing a SPACE Matrix

1. Select a set of variables to define FS,

CA, ES, & IS

2. Assign a numerical value:

1. From +1 to +6 to each FS & IS dimension

2. From -1 to -6 to each ES & CA dimension

3. Compute an average score for each FS,CA, ES, & IS


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Steps to Developing a SPACE Matrix

1. Plot the average score on the

appropriate axis

2. Add the two scores on the x-axis and plot

the point. Add the two scores on the y-

axis and plot the point. Plot the

intersection of the new xy point

3. Draw a directional vector from the origin

through the new intersection point.


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9

SPACE MatrixFS

+6

+1

+5

+4

+3

+2

-6

-5

-4

-3

-2

-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

ES

CA IS

Conservative Aggressive

Defensive Competitive

(1.6, 1.4)


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Strategy-Formulation Analytical

FrameworkSWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:The Matching Stage


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INTRODUCTION

BOSTON CONSULTING GROUP (BCG)

MATRIXis developed byBRUCEHENDERSONof theBOSTON

CONSULTING GROUP IN THE EARLY1970s.

According to this technique, businesses orproducts are classified as low or highperformers depending upon their marketgrowth rate and relative market share.


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QUESTION MARKSHigh growth , Low market share

Most businesses start of as question marks.

They will absorb great amounts of cash if themarket share remains unchanged, (low).

Question marks have potential to become star

and eventually cash cow but can also becomea dog.

Investments should be high for question marks.


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STARSHigh growth, High market share

Stars are leaders in business.

They also require heavy investment, to maintain its large market

share.

It leads to large amount of cash consumption and cash generation.

Attempts should be made to hold the market share otherwise the

star will become a CASH COW.


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CASH COWSLow growth , High market share

They are foundation of the company and often the stars

of yesterday.

They generate more cash than required.

They extract the profits by investing as little cash as

possible

They are located in an industry that is mature, not

growing or declining.


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DOGSLow growth, Low market share

Dogs are the cash traps.

Dogs do not have potential to bring inmuch cash.

Number of dogs in the company should be

minimized.

Business is situated at a declining stage.


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Relative Market Share and

Market Growth

To understand theBoston Matrix

you need to understand howmarket share and market growth

interrelate.


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MARKET SHARE

Market share is the percentage of the total market that is beingserviced by your company, measured either in revenue terms orunit volume terms.

RELATIVE MARKET SHARE

RMS = Business unit sales this year

Leading rival sales this year

The higher your market share, the higher proportion of themarket you control.


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MARKET GROWTH

RATE Market growth is used as a measure of a markets

attractiveness.

MGR = Individual sales - individual sales

this year last yearIndividual sales last year

Markets experiencing high growth are ones where

the total market share available is expanding, andtheres plenty of opportunity for everyone to makemoney.


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MAIN STEPS OF BCG MATRIX

Identifying and dividing a company into SBU.

Assessing and comparing the prospects of each SBU

according to two criteria :

1. SBUS relative market share.2. Growth rate OF SBUS industry.

Classifying the SBUS on the basis of BCG matrix.

Developing strategic objectives for each SBU.


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BCG MATRIX WITH CASH FLOW


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BENEFITS

BCG MATRIX is simple and easy to

understand.

It helps you to quickly and simply screen the

opportunities open to you, and helps you

think about how you can make the most of

them.

It is used to identify how corporate cashresources can best be used to maximize a

companys future growth and profitability.


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LIMITATIONS

BCG MATRIX uses only two dimensions, Relative market

share and market growth rate.

Problems of getting data on market share and market

growth.

High market share does not mean profits all the time.

Business with low market share can be profitable too.


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CONCLUSION

Though BCG MATRIX has its limitations it is one

of the most FAMOUS AND SIMPLE portfolioplanning matrix ,used by large companies

having multi-products.

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