Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -1 Subjective decisions based on objective information Generating alternative strategies Selecting strategies to pursue Best alternative course of action to achieve mission & objectives Derived from vision, mission, objectives, external audit, and internal audit Strategy Analysis & Choice

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -2 Strategy Analysis & Choice Generating Alternatives – Participation in generating alternative strategies should be as broad as possible

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -3 Comprehensive Strategy- Formulation Framework Stage 1 - Input Stage  EFE Matrix  IFE matrix  CPM Stage 2 - Matching Stage  SWOT  SPACE matrix  BCG matrix  IE Matrix  Grand strategy matrix Stage 3 - Decision Stage  QSPM

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -4 Strategy-Formulation Framework External Factor Evaluation Matrix (EFE) Internal Factor Evaluation Matrix (IFE) Competitive Profile Matrix (CPM) Stage 1: The Input Stage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -5 Stage 2: The Matching Stage Match between organization’s internal resources & skills and the opportunities & risks created by its external factors

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -6 Strategy-Formulation Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -7 Stage 2: The Matching Stage Strengths Weaknesses Opportunities Threats SWOT Matrix

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -8 SWOT Matrix Strengths-Opportunities (SO) Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT) Four Types of Strategies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -9 SWOT Matrix SO strategies use a firm’s internal strengths to take advantage of external opportunities WO strategies improve internal weaknesses by taking advantage of external opportunities ST strategies use a firm’s strengths to avoid or reduce the impact of external threats WT strategies defensive tactics aimed at reducing internal weakness and avoiding external threats

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Limitations with SWOT Matrix Does not show how to achieve a competitive advantage Provides a static assessment in time May lead the firm to overemphasize a single internal or external factor in formulating strategies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategy-Formulation Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch SPACE Matrix Strategic Position & Action Evaluation Matrix Aggressive Conservative Defensive Competitive

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -13

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategy-Formulation Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch BCG Matrix Question Marks – low relative market share in a high-growth industry Stars – high relative market share in a high- growth industry Cash Cows – high relative market share in a low-growth industry Dogs – Low relative market share in a slow or no growth industry

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 6 -16

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategy-Formulation Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategy-Formulation Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Grand Strategy Matrix Tool for formulating alternative strategies Based on two dimensions  Competitive position  Market growth

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Quadrant IV 1. Related diversification 2. Unrelated diversification 3. Joint ventures Quadrant III 1. Retrenchment 2. Related diversification 3. Unrelated diversification 4. Divestiture 5. Liquidation Quadrant I 1. Market development 2. Market penetration 3. Product development 4. Forward integration 5. Backward integration 6. Horizontal integration 7. Related diversification Quadrant II 1. Market development 2. Market penetration 3. Product development 4. Horizontal integration 5. Divestiture 6. Liquidation RAPID MARKET GROWTH SLOW MARKET GROWTH WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategy-Formulation Analytical Framework Stage 3: The Decision Stage Quantitative Strategic Planning Matrix (QSPM)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch QSPM Sets of strategies considered simultaneously or sequentially Integration of pertinent external & internal factors in the decision- making process Advantages

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch QSPM Requires intuitive judgments & educated assumptions Only as good as the prerequisite inputs Limitations