Strategy Analysis and Choice ; Group 4.pptx

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1. Strategy Analysis and Choice Group 4

2. Alya Ramadani Tessa Agnesti Marliano Andrea Pangestu Meet The Group C1C022043 C1C022126 C1C022127 Besra Adinda Saputra Alya Dwi Fitriyati C1C022130 C1C022149 Group IV

3. Strategy Analysis and Choice Strategy analysis and choice seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives. The firm’s present strategies,objectives , vision, and mission, coupled with the external and internal audit information,provide a basis for generating and evaluating feasible alternative strategies. The Process of Generating and Selecting Strategies Strategists never consider all feasible strategies that could benefit the firm because there is an infinite number of possible actions and an infinite number of ways to implement those actions. Therefore, a manageable set of the most attractive alternative strategies must be developed, examined, prioritized, and selected. The advantages, disadvantages, trade-offs, costs, and benefits of these strategies should be determined. Group IV

4. Stage 1 of the strategy-formulation analytical framework consists of the External Factor Evaluation (EFE) Matrix, the Internal Factor Evaluation (IFE) Matrix, and the Competitive Profile Matrix (CPM). Called the input stage, Stage 1 summarizes the basic input information needed to formulate strategies. Procedures for developing an EFE, CPM, and IFE Matrixwere presented in Chapters 3 and 4, respectively Stage 1 : The Input Stage Strategy-Formulation Analytical Framework Stage 2 : The Matching Stage Strage 3 : The Decision Stage Stage 3, called the decision stage, involves a single technique, the Quantitative Strategic Planning Matrix (QSPM). A QSPM uses input information from Stage 1 to objectively evaluate feasible alternative strategies identified in Stage 2. It reveals the relative attractiveness of alternative strategies and thus provides an objective basis for selecting specific strategies. Stage 2, called the matching stage, focuses on generating feasible alternative strategies by aligning key external and internal factors. Stage 2 techniques include the Strengths - Weaknesses - Opportunities - Thrats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Matrix. Group IV

5. There are four sets of strategies developed in SWOT analysis: SO, WO, ST, and WT. SO strategies use a firm’s internal strengths to take advantage of external opportunities. All managers would like their organization to be in a position in which internal strengths can be used to take advantage of external trends and events . WO strategies aim at improving internal weaknesses by taking advantage of external opportunities. Sometimes key external opportunities exist, but a firm has internal weaknesses that prevent it from exploiting those opportunities . ST strategies use a firm’s strengths to avoid or reduce the impact of external threats. An example ST strategy could be when a firm uses its excellent legal department (as trength ) to collect millions of dollars in damages from rival firms that infringe on its patents. WT strategies are defensive tactics directed at reducing internal weakness and avoiding external threats. An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position. In fact, such a firm may have to fight for its survival, merge, retrench, declare bankruptcy, or choose to liquidate. The SWOT Matrix Group IV

6. Group IV The SWOT Matrix The process of constructing a SWOT Matrix can be summarized in eight steps, as follows: 1. List the firm’s key internal strengths. 2. List the firm’s key internal weaknesses. 3. List the firm’s key external opportunities. 4. List the firm’s key external threats. 5. Match internal strengths with external opportunities to develop specific SO strategies. 6. Match internal weaknesses with external opportunities to develop specific WOstrategies . 7. Match internal strengths with external threats to develop specific ST strategies. 8. Match internal weaknesses with external threats to develop specific WT strategies.

7. Although the SWOT Matrix is widely used in strategic planning, the analysis does include limitations. SWOT analysis does not reveal how to achieve a competitive advantage, so it must not be an end in itself. SWOT is a static assessment (or snapshot) in time. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix. There are interrelationships among the key internal and external factors that SWOT does not reveal, but that may be important in devising strategies. There are no weights or ratings in a SWOT analysis. Finally, the relative attractiveness of alternative strategies is not provided Group IV The SWOT Matrix

8. The Strategic Position and Action Evaluation (SPACE) Matrix The Strategic Position and Action Evaluation (SPACE) Matrix is another Stage 2 matching tool that uses two axes and four quadrants to reveal whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization. Axes of the SPACE Matrix represent two internal dimensions (financial position [FP] and competitive position [CP]) and two external dimensions (stability position [SP] and industry position [IP]). Group IV

9. The Strategic Position and Action Evaluation (SPACE) Matrix Steps in Performing SPACE Analysis : Step 1 Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP). Step 2 Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the FP and IP dimensions Group IV Step 3 Compute an average score for FP, CP, IP, and SP by summing the values given to the variables of each dimension and then by dividing by the number of variables included in the respective dimension. Step 4 Plot the average scores for FP, IP, SP, and CP on the appropriate axes in the SPACE Matrix. Step 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 (x, y) coordinate.

10. The Strategic Position and Action Evaluation (SPACE) Matrix A SPACE Matrix analysis has some limitations as follows: It is a snapshot in time. There are more than four dimensions that firms could/should be rated on. The directional vector could fall directly on an axis, or could even go nowhere if the coordinate is (0,0). Whenever this happens, analysts usually add a few more evaluative criteria that comprise the FP (and any other) axis to make the vector shift into a particular quadrant. Implications of the exact angle of the vector within a quadrant are unclear. The relative attractiveness of alternative strategies generated is unclear. Group IV

11. The Boston Consulting Group (BCG) Matrix Group IV BCG is a private management consulting firm that specializes in strategic planning. Based in Boston, Massachusetts and employing 6,200 consultants worldwide, BCG has approximately 90 offices in 45 countries, and annually ranks in the top five of Fortune’s list of the “100 Best Companies to Work For.”

12. Group IV The Boston Consulting Group (BCG) Matrix The BCG Matrix graphically portrays differences among divisions based on two dimensions: relative market share position on the x-axis, and industry growth rate on the y-axis. The BCG Matrix allows a multidivisional organization to manage its portfolio of businesses by examining these two dimensions for each division relative to other divisions in the organization.

13. Internal-External (IE) Matrix The The Internal-External (IE) Matrix positions the various divisions (segments) of an organization in a nine-cell view, the IE Matrix is similar to the BCG Matrix in that both tools involve plotting a company's divisions in a schematic diagram; this is why both tools are a form of portfolio analysis. There are four important differences between the BCG Matrix and the IE Matrix, which are as follows: The x and y axes are different The IE Matrix requires more information about divisions than the BCG Matrix The strategic implications of each matrix are different The IE Matrix has nine quadrants compared to four in the BCG Matrix. . Group IV

14. Although it has nine cells (or quadrants), the IE Matrix has three main regions that have different strategic implications, as follows: Region 1-Prescriptions for divisions that fall into cells I, II, or IV can be described as Grow and build. Region 2-Prescriptions for divisions that fall into cells III, V, or VII can be described as a defend and sustain strategy; market penetration and product development are two commonly used strategies for these types of divisions. Region 3-Prescriptions for divisions that fall into cells VI, VIII, or IX can be described as harvest or divest. Internal-External (IE) Matrix Group IV

15. In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy Matrix is a popular tool for formulating alternative strategies. All organizations can be positioned in one of the four strategy quadrants of the Grand Strategy Matrix. The Grand Strategy Matrix is based on two evaluative dimensions: competitive position on the x-axis and market (industry) growth on the y-axis. Grand strategy matrix Group IV

16. Decision Stage : QSPM The Quantitative Strategic Planning Matrix (QSPM), which comprises Stage 3 of the strategy formulation analytical framework objectively indicates which alternative strategies are best. The QSPM uses the inputs from the Stage analysis and matches the results from the Stage and analysis to decide objectively among the strategy alternatives. Three new terms have just been introduced - (1) attractiveness score, (2) total attractiveness score, and (3) sum of total attractiveness scores - defined and explained as the six steps required to develop a QSPM: List the company's key external and internal opportunities and threats Assign weights to each major external and internal factor. Examine the Stage 2 (matching) matrix, and identify alternative strategies that the organization should consider implementing. Determine the Attractiveness Score (AS) determined by examining each external and external or internal factor. Calculate the Total Attractiveness Score. Calculate the Total Attractiveness Score. Group IV

17. How to Estimate Costs Associated with Recommendations The SWOT, BCG, IE, SPACE, and GRAND matrices are used in strategic planning to generate feasible alternative strategies that could benefit the firm. The term recommendation is used to refer to “any alternative strategy that is selected for implementation.” Due to monetary or nonmonetary constraints, no firm can implement all alternative strategies proposed in the matching matrices, so firms utilize the QSPM and expert judgment to select particular strategies. Perhaps themost important page in a student’s strategic planning case project is his/ her Recommendations Page—a page where recommendations are listed along with an estimated dollar amount for the expected cost (or savings) of each recommendation over the next three years. The dollar amounts should all be added to reveal a total amount of new capital needed over the three years. Group IV

18. Cultural Aspects of Strategy Analysis and Choice organizational culture includes the set of shared values, beliefs, attitudes, customs, norms, rites, rituals, personalities, heroes, and heroines that describe a firm. Culture is the unique way an organization does business. It is the human dimension that creates solidarity and meaning, and it inspires commitment and productivity in an organization when strategy changes are made. Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort. Whenever two firms merge, it becomes especially important to evaluate and consider culture-strategy linkages. Group IV

19. The Politics of Strategy Analysis and Choice All organizations are political. Unless managed, political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees. Sometimes political biases and personal preferences get unduly embedded in strategy choice decisions. In the absence of objective analyses, strategy decisions too often are based on the politics of the moment. With the development of improved strategy-formation analytical tools, political factors become less important in making strategic decisions. In the absence of objectivity, political factors sometimes dictate strategies, and this is unfortunate. Group IV

20. The Politics of Strategy Analysis and Choice The following tactics used by politicians for centuries can aid strategists: Achieving desired results is more important than imposing a particular method; therefore, consider various methods and choose, whenever possible, the one(s) that will afford the greatest commitment from employees/managers. Achieving satisfactory results with a popular strategy is generally better than trying to achieve optimal results with an unpopular strategy. Group IV 3. Often, an effective way to gain commitment and achieve desired results is to shift from short-term to long-term issues and concerns. 4. Middle-level managers must be genuinely involved in and supportive of strategic decisions, because successful implementation will hinge on their support.

21. Thank You From Group 4 Group IV