1. Chapter 6 Strategy Analysis & Choice

2. Strategy Analysis & Choice
Nature of Strategy Analysis & Choice
-- Establishing long-term objectives
-- Generating alternative strategies
-- Selecting strategies to pursue
-- Best alternative - achieve mission & objectives

3. Stage 2: The Matching Stage Stage 3: The Decision Stage
Comprehensive Strategy-Formulation Framework
Stage 1: The Input Stage
Stage 2: The Matching Stage
Stage 3: The Decision Stage

4. Strategy-Formulation Analytical Framework
Internal Factor Evaluation Matrix (IFE)
Stage 1: The Input Stage
External Factor Evaluation Matrix (EFE)
Competitive Profile Matrix (CPM)

5. Stage 2: The Matching Stage
Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
Stage 2: The Matching Stage
BCG Matrix
IE Matrix
Grand Strategy Matrix

6. Four Types of Strategies
SWOT Matrix
Four Types of Strategies
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)

7. Strengths Weaknesses Opportunities
SO Strategies
Strengths Weaknesses Opportunities
Threats SWOT
Use a firm’s internal strengths to take advantage of external opportunities
SO Strategies

8. Strengths Weaknesses Opportunities
WO Strategies
Strengths Weaknesses Opportunities
Threats SWOT
Improving internal weaknesses by taking advantage of external opportunities
WO Strategies

9. Strengths Weaknesses Opportunities
ST Strategies
Strengths Weaknesses Opportunities
Threats SWOT
Use a firm’s strengths to avoid or reduce the impact of external threats
ST Strategies

10. Strengths Weaknesses Opportunities
WT Strategies
Strengths Weaknesses Opportunities
Threats SWOT
Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats
WT Strategies

11. SWOT Matrix Leave Blank Strengths – S List Strengths Weaknesses – W
List Weaknesses
Opportunities – O
List Opportunities
SO Strategies Use strengths to take advantage of opportunities
WO Strategies 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

12. Matching Key Factors to Formulate Alternative Strategies
Key Internal Factor
Key External Factor
Resultant Strategy
Develop a new employee benefits package =
Strong union activity (threat) +
Poor employee morale (weakness)
Develop new products for older adults
Decreasing numbers of young adults (threat)
Strong R&D (strength)
Pursue horizontal integration by buying competitor's facilities
Exit of two major foreign competitors form the industry (opportunity)
Insufficient capacity (weakness)
Acquire Cellfone, Inc.
20% annual growth in the cell phone industry (opportunity)
Excess working capacity (strength)

13. External Strategic Position Internal Strategic Position
SPACE Factors
Industry Strength (IS)
Growth potential
Profit potential
Financial stability
Technological know-how
Resource utilization
Ease of entry into market
Productivity, capacity utilization
Competitive Advantage CA
Market share
Product quality
Product life cycle
Customer loyalty
Competition’s capacity utilization
Control over suppliers & distributors
External Strategic Position
Internal Strategic Position

14. SPACE Matrix FS Conservative Aggressive CA IS Defensive Competitive ES+6 +5 +4 +3 +2 +1 CA IS -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 -1 -2 -3 -4
Defensive -5
Competitive -6 ES

15. Relative Market Share Position Industry Sales Growth Rate
BCG Matrix
Relative Market Share Position
High
1.0
Medium
.50
Low
0.0
Dogs IV
Cash Cows
III
Question Marks I
Stars II
Industry Sales Growth Rate
High
+20
Medium
Low
-20

16. RAPID MARKET GROWTH Quadrant II Market development Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
Quadrant I
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Concentric diversification
WEAK
COMPETITIVE
POSITION
STRONG
COMPETITIVE
POSITION
Quadrant III
Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate diversification
Liquidation
Quadrant IV
Concentric diversification
Horizontal diversification
Conglomerate diversification
Joint ventures
SLOW MARKET GROWTH

17. Strategy-Formulation Analytical Framework
Quantitative Strategic Planning Matrix (QSPM)
Stage 3: The Decision Stage

18. Corporate Governance Issues
Business Week’s “principles of good governance”
No more than 2 directors current or former company executives
No directors do business with the company
Audit, compensation, and nominating committees made up of outside directors
Each director attends at lest 75% of all meetings
Audit committee meets at least four times a year
CEO is not also the Chairperson of the Board
Shareholders have considerable power and information to choose & replace directors
Stock options are considered a corporate expense
No interlocking directorships