Chapter 6

Strategy Analysis & Choice

Strategy Analysis & Choice

Nature of Strategy Analysis & Choice

-- Establishing long-term objectives

-- Generating alternative strategies
-- Selecting strategies to pursue
-- Best alternative - achieve mission &
objectives
Strategy Analysis & Choice
Alternative Strategies Derive From --

• Vision
• Mission
• Objectives

• External audit
• Internal audit

• Past successful strategies

Comprehensive Strategy-Formulation
Framework

Stage 1:
The Input Stage

Stage 2: Stage 3:
The Matching Stage The Decision Stage
Strategy-Formulation Analytical
Framework
Internal Factor Evaluation
Matrix (IFE)

Stage 1: Competitive Profile Matrix

The Input Stage (CPM)

External Factor Evaluation

Matrix (EFE)

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
Strategy-Formulation Analytical
Framework
SWOT Matrix

Stage 2: BCG Matrix

The Matching Stage

Grand Strategy Matrix

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 Matrix
Four 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 advantage
of 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
Strengths – S Weaknesses –
W
Leave Blank
List Strengths
List Weaknesses
Opportunities – SO Strategies WO Strategies
O
Use strengths to take Overcoming
advantage of weaknesses by taking
List Opportunities opportunities advantage of
opportunities

Threats – T ST Strategies WT Strategies

Use strengths to avoid Minimize weaknesses

List Threats threats and avoid threats
 Strengths: Weaknesses:

1. Over dependent on borrowings -

1. R and D almost complete
Insufficient cash resources
2. Basis for strong management team
2. Board of Directors is too narrow
3. Key first major customer acquired
3. Lack of awareness amongst
4. Initial product can evolve into range
prospective customers
of offerings
4. Need to relocate to larger premises
5. Located near a major centre of
5. Absence of strong sales/marketing
excellence
expertise
6. Very focused management/staff
6. Overdependence on few key staff
7. Well-rounded and managed
7. Emerging new technologies may
business
move market in new directions
Threats: Opportunities:

1. Major player may enter targeted

market segment
1. Market segment is poised for rapid
2. New technology may make products
growth
obsolescent
2. Export markets offer great potential
3. Economic slowdown could reduce
3. Distribution channels seeking new
demand
products
4. Euro/Yen may move against $
4. Scope to diversify into related
5. Market may become price sensitive
market segments
6. Market segment's growth could
attract major competition
 Key Strategies
1. 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
 SWOT Matrix
Strengths – S Weaknesses – W

Leave Blank List Strengths List Weaknesses

Opportunities – O SO Strategies WO Strategies

Match and determine
List Opportunities strategy Match and determine
strategy

Threats – T ST Strategies WT Strategies

Match and determine Match and determine
List Threats strategy strategy

Inset key strategies into correct box element of the Matrix

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
 RAPID MARKET GROWTH
Quadrant II Quadrant I
1. Market development 1. Market development
2. Market penetration 2. Market penetration
3. Product development 3. Product development
4. Horizontal integration 4. Forward integration
5. Divestiture 5. Backward integration
6. Liquidation 6. Horizontal integration
WEAK 7. Concentric diversification
STRONG
COMPETITIVE COMPETITIVE
POSITION Quadrant III Quadrant IV
POSITION
1. Retrenchment 1. Concentric diversification
2. Concentric diversification 2. Horizontal diversification
3. Horizontal diversification 3. Conglomerate
4. Conglomerate diversification
diversification 4. Joint ventures
5. Liquidation
SLOW MARKET GROWTH
16
Grand Strategy Matrix

Quadrant I

Excellent strategic position

Concentration on current markets/products
Take risks aggressively when necessary
Which type of strategy would you suggest?
Grand Strategy Matrix

Quadrant II

Evaluate present approach

How to improve competitiveness
Rapid market growth requires intensive
strategy
Grand Strategy Matrix

Quadrant III

Compete in slow-growth industries

Weak competitive position
Drastic changes quickly
Cost & asset reduction (retrenchment)
Grand Strategy Matrix

Quadrant IV

Strong competitive position

Slow-growth industry
Diversification to more promising growth
areas
Strategy-Formulation Analytical
Framework

Quantitative Strategic
Stage 3:
Planning Matrix
The Decision Stage
(QSPM)

Technique designed to determine the relative

attractiveness of feasible alternative actions