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MBA
Strategic Management
Strategic Choice
Comprehensive Strategy-Formulation
Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage
Stage 1:
The Input Stage
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Resultant Strategy
Insufficient capacity
(weakness)
Decreasing numbers of
young adults (threat)
SPACE Matrix
Strategic Position & Action Evaluation Matrix
Aggressive
Conservative
Defensive
Competitive
SPACE Matrix
SPACE Matrix
Two External Dimensions
Environmental Stability (ES)
Industry Strength (IS)
SPACE Factors
Internal Strategic Position
SPACE Factors
Internal Strategic Position
Competitive Advantage CA
Market share
Product quality
Product life cycle
Customer loyalty
Competitions capacity utilization
Technological know-how
Control over suppliers & distributors
Growth potential
Profit potential
Financial stability
Technological know-how
Resource utilization
Ease of entry into market
Productivity, capacity utilization
SPACE Matrix
FS
Conservative
Aggressive
+6
+5
+4
+3
+2
+1
CA
IS
-6
-5
-4
-3
-2
-1
+1
-1
+2 +3
+4
+5
+6
-2
-3
-4
Defensive
-5
Competitive
-6
ES
14
15
16
17
18
19
20
Portfolio Analysis
BCG Tool for Analyzing Opportunities
& Ability to Compete
Business Strength
Indicator Companys Market Share Relative to Largest
Competitor
24
Star Strategies
Leader expanding industry
Generates large profits
Requires substantial
investments to sustain
growth
Farthest down on
experience curve relative to
competition
Increase sales e.g. new
markets, new channels of
distribution
Increase market share
Problem Child or ?
Low market share in
expanding industry
Needs substantial cash to
improve its position
Slow progress on
experience curve
Increase sales (limit to niche
or increase market share
(limit to niche)
Leave market
Cash Cow
Leader in mature or declining
industry
Can generate funds for other
SBUs
Maintain market share e.g.
ensure quality, build customer
loyalty, develop substitute brands
Maximize Cash Flow e.g. increase
usage rate, rate of replacement,
modify expense structure, raise
prices
Dogs
Low market share in a
mature or declining industry
Slow progress on
experience curve
Cost disadvantages and few
growth opportunities
Harvest or Divest
Concentrate on niches
requiring limited effort
Portfolio Analysis
GE Tool for Analyzing Opportunities
& Ability to Compete
GE Portfolio Analysis
Classification of SBUs/products into nine cell
matrix based on
Market Attractiveness
Multiple Indicators
Business Strength
Multiple Indicators
Market Factors
Size
Growth Rate
Cyclicality
Seasonality
Competition
Type of competitors
Degree of Concentration
Technological
Patents & copyrights
Will it become obsolete
Sociopolitical
Social attitudes & trends
Laws & government regulations
GE Portfolio Analysis
Business Strength Indicators
Market
Companys Market Share
Companys Sales or Share Growth Rate
Competition
Strength of product, promotion, price, distribution,
financial resources, management relative to
competition
GE Portfolio Analysis
Business Strength Indicators
Technological
Companys ability to cope with change
Technological skills
Patent Protection
Sociopolitical
Companys responsiveness & flexibility
Industry
Attractiveness
GE Nine-Cell Matrix
Relative Costs
Profit Margins
Fit with KSFs
Market Size
Growth Rate
Profit Margin
10.0
Intensity of Competition
Seasonality
High
Cyclicality
Resource Requirements
6.7
Social Impact
Regulation
Medium
Environment
Opportunities & Threats
3.3
Relative Market Share
Low
Reputation/ Image
Bargaining Leverage
Ability to Match Quality/Service 1.0
Strong
6.7
Average
3.3
Weak
1.0
Market
Competitive
Position
Strong
Medium
Maintain Leadership
Invest to Grow
Challenge Leader
Concentrate on Maintaining
Strength
Reinforce Strengths
Challenge Leader/Build
Selectively
Weak
Attractiveness
High
Medium
Low
Overcome Weakness,
Invest to Build Selectively Find Niche or Quit
Build Selectively
Harvest (Gradual
Protect existing programs Withdrawal) or Limited
Expansion
Concentrate on
profitable, less risky
segments
Generate Cash
Harvest
Divest
Minimize Investment
Protect positions in most
profitable segments
Strategy Implications of
Attractiveness/Strength Matrix
Allows for intermediate rankings between high and low and between
strong and weak
Superior performance
Corporate Strategies
(Grand Strategies)
I. Directional Strategies
A.
Growth Strategies
1. Concentration
a. Vertical Growth
b. Horizontal Growth
2. New Product
3. New Market
4. Diversification
a. Concentric
b. Conglomerate
B.
Stability Strategies
1. Pause
2. No Change
3. Profit
C.
Retrenchment Strategies
1. Turnaround
2. Captive Company
3. Sell out or Divestment
4. Bankruptcy or Liquidation
II. Portfolio Strategy
III. Parenting Strategy
i.
Forward Integration
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
Exporting
Licensing
Franchising
Joint Ventures
Acquisitions
Green Field Development
Production Sharing
Turnkey operations
Management contracts
Build, Operate, Transfer (BOT)
Competitive position
Market growth
WEAK
COMPETITIVE
POSITION
Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
Quadrant I
Quadrant III
Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate
diversification
Liquidation
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Concentric diversification
Quadrant IV
Concentric diversification
Horizontal diversification
Conglomerate
diversification
Joint ventures
STRONG
COMPETITIVE
POSITION
Quadrant I
Quadrant II
Quadrant III
Quadrant IV
Ansoffs matrix
Ansoffs Matrix
This matrix was developed by Igor Ansoff
It is a framework for identifying corporate growth
opportunities
Two dimensions determine the scope of options,
namely
products and markets
Ansoffs Matrix
Existing product
New product
Existing
market
Market penetration
Increase sales to the
existing market
Penetrate more deeply
into the existing market
Product development
New product developed for
existing markets
New market
Market development
Existing products sold to
new markets
Diversification
New products sold in new
markets
Market Penetration
Aim of the strategy:
To maintain or increase share of the current market with current
products
To secure dominance of a growth market or restructure a mature
market by driving out competition
Market development
This involves
Market development
Market development is used when
Untapped markets are beckoning
The firm has excess capacity
There are attractive channels to access new
market
Market development involves moderate risk there is a lack of familiarity with customers
but at least the product is familiar
Product development
This is the development of new products for
the existing market
New products come in the form of:
New products to replace current products
New innovative products
Product improvements
Product line extensions
New products to complement existing products
Products at a different quality level to existing
products
Product development
Product development is used when:
The Firm has strong R&D capabilities
The market is growing
There is rapid change
The firm can build on existing brands
Competitors have better products
Diversification
Diversification in the Ansoff Matrix means:
New products sold to new markets
New products for new customers
Related diversification
This is development beyond present product market but still
within the broad confines of the industry
Markets and products share some commonality with existing
products
Therefore it builds on assets or activities which the firm has
developed
Related diversification can also be seen as synergistic
diversification since it involves harnessing exiting product
market knowledge
This closeness can reduce the risks associated with
diversification
Example: banks developing insurance products
Related diversification
Horizontal diversification: when new products are
introduced to current markets
Vertical diversification: when an organisation
decides to move into its suppliers or customers
business to secure supply or to firm up the use of
products in end products
Concentric diversification: when new products
closely related to current products are introduced
into new markets
The product might be new but is it genuinely
diversification into new markets?
Unrelated diversification
Features of unrelated diversification
Growth in products and markets that are completely new
Development beyond the present industry into products and
markets which bear little relation to the present product
market mix
No commonality with existing products and markets