Chapter 2.3 Strategic Analysis &choice.ppt

Teaching PPT

1. Chapter 2.3
Strategy Analysis and Choice
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2. A Comprehensive Strategic-
Management Model
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3. The Process of Generating and
Selecting Strategies
Nature of Strategy Analysis & Choice
Establishing long-term objectives
•Generating alternative strategies
•Selecting strategies to pursue
•Best alternative –achieve mission & objectives
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4. Vision
Mission
Objectives
External audit
Internal audit
Past successful strategies
Strategy Analysis & Choice
Alternative Strategies Derive From:
Ch 7 -4 Copyright © 2011 Pearson Education

5. Ch 6 -5
Strategy Analysis & Choice
Generating Alternatives
•Participation in generating alternative strategies should
be as broad as possible
•Alternative strategies proposed by participants should be
considered, discussed, and ranked in order of
attractiveness
Ch 7 -5 Copyright © 2011 Pearson Education

6. The Strategy-Formulation
Analytical Framework
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7. Ch 6 -7
Comprehensive Strategy-Formulation Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage
Ch 7 -7 Copyright © 2011 Pearson Education

8. A Comprehensive Strategy-
Formulation Framework
Stage 1 -Input Stage
summarizes the basic input information
needed to formulate strategies
consists of the EFE Matrix, the IFE Matrix,
and the Competitive Profile Matrix (CPM)
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9. Ch 6 -9
Strategy-Formulation Analytical Framework
Internal Factor Evaluation
Matrix (IFE)
External Factor Evaluation
Matrix (EFE)
Competitive Profile Matrix
(CPM)
Stage 1:
The Input Stage
Ch 7 -9 Copyright © 2011 Pearson Education

10. A Comprehensive Strategy-
Formulation Framework
Stage 2 -Matching Stage
focusesongeneratingfeasiblealternative
strategiesbyaligningkeyexternalandinternal
factors
techniquesincludetheStrengths-Weaknesses-
Opportunities-Threats(SWOT)Matrix,the
StrategicPositionandActionEvaluation
(SPACE)Matrix,theBostonConsultingGroup
(BCG)Matrix,theInternal-External(IE)Matrix,
andtheGrandStrategyMatrix
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11. Ch 6 -11
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -11 Copyright © 2011 Pearson Education

12. MatchingKey External and Internal Factors
to Formulate Alternative Strategies
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13. SWOT Matrix
1.List the firm’s key external opportunities
2.List the firm’s key external threats
3.List the firm’s key internal strengths
4.List the firm’s key internal weaknesses
5.Match internal strengths with external
opportunities
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14. The Matching Stage
The Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix
helps managers develop four types of
strategies:
SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies
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15. SO Strategies
Use a firm’s
internal strengths
to take advantage
of external
opportunities
SO
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -15 Copyright © 2011 Pearson Education

16. WO Strategies
Improving internal
weaknesses by
taking advantage
of external
opportunities
WO
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -16 Copyright © 2011 Pearson Education

17. ST Strategies
Use a firm’s
strengths
to avoid or
reduce the impact
of external
threats
ST
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -17 Copyright © 2011 Pearson Education

18. WT Strategies
Defensive tactics
aimed at reducing
internal
weaknesses &
avoiding
environmental
threats
WT
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -18 Copyright © 2011 Pearson Education

19. SWOT Matrix
Strengths –
S
List Strengths
Weaknesses –
W
List Weaknesses
Opportunities –
O
List Opportunities
SO
Strategies
Use strengths to
take advantage of
opportunities
WOStrategies
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
Ch 6 -19
Ch 7 -19 Copyright © 2011 Pearson Education

20. Limitations with SWOT Matrix
Doesnotshowhowtoachievea
competitiveadvantage
Mayleadthefirmtooveremphasizea
singleinternalorexternalfactorin
formulatingstrategies
Ch 7 -20 Copyright © 2011 Pearson Education

21. Ch 6 -21
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -21 Copyright © 2011 Pearson Education

22. Ch 6 -22
SPACE Matrix
Strategic Position & Action Evaluation Matrix
4-quadrants indicate whether the most appropriate
strategy is:
•Aggressive
•Conservative
•Defensive
•Competitive
Ch 7 -22 Copyright © 2011 Pearson Education

23. SPACE Matrix
TheaxesoftheSPACEMatrixrepresent
1.TwointernaldimensionsFinancialPosition[FP]
andCompetitivePosition[CP])and
2.TwoexternaldimensionsStabilityPosition[SP]
andIndustryPosition[IP]).
Thesefourfactorsareperhapsthemostimportant
determinantsofanorganization’soverallstrategic
position.
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24. Factors That Make Up the
SPACE Matrix Axes
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25. Factors That Make Up the
SPACE Matrix Axes
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26. Steps to Develop a SPACE Matrix
1.Selectasetofvariablestodefine
financialposition(FP),competitive
position(CP),stabilityposition(SP),and
industryposition(IP)
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27. Steps to Develop a SPACE Matrix
2.Assignanumericalvaluerangingfrom+1
(worst)to+7(best)toeachofthe
variablesthatmakeuptheFPandIP
dimensions.
Assignanumericalvaluerangingfrom–1
(best)to–7(worst)toeachofthe
variablesthatmakeuptheSPandCP
dimensions
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28. Steps to Develop a SPACE Matrix
3.Compute an average score for FP, CP, IP, and
SP
4.Plot the average scores for FP, IP, SP, and CP
on the appropriate axis in the SPACE Matrix
5.Add the two scores on the x-axis and plot the
resultant point on X. Add the two scores on the
y-axis and plot the resultant point on Y. Plot the
intersection of the new xy point
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29. Steps to Develop a SPACE Matrix
6.Draw a directional vector from the origin
of the SPACE Matrix through the new
intersection point
This vector reveals the type of strategies
recommended for the organization:
aggressive, competitive, defensive, or
conservative
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30. 6-30

31. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
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32. Example: Strategy Profiles
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33. Ch 6 -33
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -33 Copyright © 2011 Pearson Education

34. The Boston Consulting Group
(BCG) Matrix
BCG Matrix
graphically portrays differences among
divisions in terms of relative market share
position and industry growth rate
allows a multidivisional organization to
manage its portfolio of businesses by
examining the relative market share position
and the industry growth rate of each division
relative to all other divisions in the
organization
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35. The BCG Matrix
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36. The BCG Matrix
Question marks –Quadrant I
Organizationmustdecidewhetherto
strengthenthembypursuinganintensive
strategy(marketpenetration,market
development,orproductdevelopment)orto
sellthem
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37. Ch 6 -37
BCG Matrix
Stars
•High 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
Ch 7 -37 Copyright © 2011 Pearson Education

38. Ch 6 -38
BCG Matrix
Cash Cows
•High 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 possible
-Product development, concentric diversification
-If weakens –retrenchment or divestiture
Ch 7 -38 Copyright © 2011 Pearson Education

39. Ch 6 -39
BCG Matrix
Dogs
•Low relative market share, competes in slow or
no market growth
-Weak internal & external position
•Liquidation, divestiture, retrenchment
Ch 7 -39 Copyright © 2011 Pearson Education

40. The BCG Matrix
The major benefit of the BCG Matrix is
that it draws attention to the cash flow,
investment characteristics, and needs of
an organization’s variousdivisions
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41. Ch 6 -41
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -41 Copyright © 2011 Pearson Education

42. 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 7 -42 Copyright © 2011 Pearson Education

43. The Internal-External (IE) Matrix
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44. 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 7 -44 Copyright © 2011 Pearson Education

45. Ch 6 -45
Strategy-Formulation Analytical Framework
SPACE Matrix
BCG Matrix
IE Matrix
Stage 2:
The Matching Stage
SWOT Matrix
Grand Strategy Matrix
Ch 7 -45 Copyright © 2011 Pearson Education

46. The Grand Strategy Matrix
Grand Strategy Matrix
based on two evaluative dimensions:
•competitive position and
•market (industry) growth
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47. The Grand Strategy Matrix
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48. The Grand Strategy Matrix
Quadrant I
continuedconcentrationoncurrentmarkets
(marketpenetrationandmarketdevelopment)and
products(productdevelopment)isanappropriate
strategy
QuadrantII
unabletocompeteeffectively
needtodeterminewhythefirm’scurrentapproach
isineffectiveandhowthecompanycanbest
changetoimproveitscompetitiveness
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49. The Grand Strategy Matrix
Quadrant III
must make some drastic changes quickly to
avoid further decline and possible liquidation
Extensive cost and asset reduction
(retrenchment) should be pursued first
Quadrant IV
have characteristically high cash-flow levels and
limited internal growth needs and often can
pursue related or unrelated diversification
successfully
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50. Thank you!!!
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