1. STRATEGY ANALYSIS AND CHOICE

3. The Nature Strategy Analysis and Choices
To Achieve Mission & Objective
External Env’ Analysis
Generate, Evaluate, Select Strategies
Vision & Mission
Establish Long term Objective
Internal Env’ Analysis

4. The Strategy Formulation Framework
STAGE – 1 : The Input Stage
External Factor Evaluation (EFE)
Competitor Profile Matrix (CPM)
Internal Factor Evaluation (IFE)
STAGE – 2 : Matching Stage
Strategic Position and Action Evaluation
Boston Consulting Group (BCG)
Internal External (IE) Matrix
Grand Strategy Matrix
SWOT Matrix
STAGE – 3 : Decision Stage
Quantitative Strategic Planning Matrix (QSPM)

5. SWOT Matrix Strength Weaknesses Opportunities Threats
Inventory turn over up to 6,7%
Average customer purchase up to $ 128
Employee morale is excellent
In store promotion = 20% increase in sale
Revenue up to 16%
Newspaper adv expense down 10%
Technical support has MIS degree
Debt to total asset down 34%
Software revenue down 12%
Location of store hurt by new highway
Total store revenue down 8%
Carpet in store must be repaired
Store have no Website
Bathroom need refurbishing
Supplier time delivery up 2 days
Cust’ checkout process too slow
Opportunities
Population growing 10%
Rival store opening 1 km away
Vehicle traffic up 12%
Computer user growing 8%
Small business growth 10%
Desire for Website up 18%
Vendor average six new product
Add 4 new in store promotion monthly (S4, O3)
Add 2 new repair/service person (S5, O4)
Send flyer to senior over age 55 (S6, O4)
Purchase land to built new store (W2, O2)
Up Website service by 50% (W5, O6)
Launch mail out to all realtors in city (W3, O6)
Best buy opening new store
Local Univ offer computer repair
New bypass hwy will divert traffic
New mall being built nearby
Vendor raising price 8%
Gas prices up 14%
Hire 2 more repair person and market the new service (S5, S7, T1)
Purchase land to built new store (S8, T3)
Raise out-of-store service call from $60 to $80 (S5, T6)
Hire 2 new cashier (W8,T1,T4)
Install new carpet /paint bath (W4.6, T1)
Threats

6. Strategic Position and Action Evaluation (SPACE)FS
Financial
Strength +6
Conservative :
Market Penetration
Market Development
Product Development
Related Diversification +5
Aggressive :
B, F, H Integration
Market Penetration
Market Development
Product Development
Diversification +4 +3
Competitive
Advantage +2 +1
Industry Strength CA IS -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 +7 -1
Defensive :
Retrenchment
Divestiture
Liquidation -2
Competitive :
B, F, H Integration
Market Penetration
Market Development
Product Development -3 -4 -5 -6
Environmental Stability ES

7. Example Factors of SPACE
External Strategic Position
Internal Strategic Position
Environmental Stability (ES) : Technological change, Rate of Inflation, Demand variability, Price range of competing product, Barrier to entry into market, Competitive pressure, Ease of exit from market, Price elasticity of demand, Risk involve in business. Industry Strength (IS) : Growth potential, Profit potential, Financial Stability, Technological know-how, Resource utilization, Ease to entry into market, Productivity, Capacity Utilization.
Financial Strength (FS) : Return on Investment, Leverage, Liquidity, Working Capital, Cash Flow, Inventory turn over, Earning per share, Price earning ratio. Competitive Advantage (CA) : Market share, Product quality, Product Life cycle, Customer Loyalty, Competition’s capacity utilization, Technological know-how, Control over supplier and distributor

8. The Steps to Develop a SPACE Matrix
Select a set of variables to define Financial Position (FP), Competitive Position (CP), Stability Position (SP) and Industry Position (IP)
Assign numerical value ranging from +1 (Worst) to +7 (Best) for FP and IP dimension. Assign -1(best) to -7 (Worst) for SP and CP dimension
FP and CP makes comparison to competitors, SP and IP compare to other industries.
Compute an average score of FP, IP, SP and CP
Plot the average scores for FP, IP, SP and CP on the axis in the SPACE Matrix
Add the two scores in each x-axis and y-axis and make the resultant
Draw a directional vector that reveals the strategies recommended.

9. SPACE Matrix for a Bank TUGAS : Kerjakan secara kelompok
Perhatikan data Financial Position FP, Competitive Position CP, Industry Position IP dan Stability Position SP dari sebuan Bank pada halaman 216, Tabel 6-3
Tentukan besaran vektor FP, CP, IP dan SP
Tentukan resultant dari keempat vektor tersebut
Tentukan strategi yang harus dijalankan oleh bank tersebut

10. Boston Consulting Group (BCG)
Cash Generation (Market Share)
High
Low
Star
Question Mark
Backward Integration
Forward Integration
Horizontal Integration
Market Penetration
Market Development
Product Development
Market Penetration
Market Development
Product Development
Divestiture
Market Share : Sales relative to those of other competitors in the market (dividing point is usually selected to have only two three largest competitors in any market fall into the high market share region).
Growth Rate : Industry Growth rate in constant dollars (dividing point is typically GNP’s growth rate)
High ?? *
Cash Use (Growth Rate)
Cash Cow
Dog Rp X
Low
Diversification
Product Development
Divestiture
Retrenchment
Retrenchment
Liquidation
Divestiture

11. BCG Matrix Example Tugas Kelompok : Buatlah BCG Matrix nya Division
Sales (MilyardRp)
% Sales
Profit (Juta Rp)
% Profit
Market Share
Growth Rate (%)
1. Victoria Secret
5,139
51,5
799
68,0
0,8 10
2. Bath & Body Works
2,556
25,6
400
39,0
0,4 05
3. Express
1,749
17,5 12
1,2
0,2 00
4. Limited Stores
0,493
4,9 4
0,1
0,5
-0,5
5. Henri Bendel & Mast
0,042
-188
-18,3
0.02
-10
TOTAL
9,979
100
1,027

12. The Internal-External (IE) Matrix
B, F, H Integration
Market Penetration
Market Development
Product Development
The IFE Total Weighted Score
Strong
3.0 – 4.0
Average
2.0 – 3.0
Weak
1.0 – 2.0
3.0
2.0
1.0
4.0 I II
III
High
3.0 – 4.0
3.0 IV V VI
The EFE Total Weighted Score
Medium
2.0 – 3.0
2.0
VII
VIII IX
Low
1.0 – 2.0
1.0
Hold and Maintain
Market Penetration
Product Development
Harvest or Divest
Retrenchment
Divestiture

13. IE Matrix Example
Division
Sales (MilyardRp)
% Sales
Profit (Juta Rp)
% Profit
IFE Score
EFE I
100
25.0 10 50
3,6
3,2 II
200
50.0 5 25
2,1
3,5
III
12.5 4 20
3,1 IV 1
1,8
2,5
TOTAL
400
Buatlah IE Matrix nya

14. Model of Grand Strategy Matrix
Grand Strategy Matrix become a popular tool for formulating alternative strategies.
Grand Strategy Matrix is based on two evaluative dimension : Competitive Position CP and Market (Industry) Growth.
Growth in sales exceeds 5% could be considered to have rapid growth
Firm located in Quadrant 1 of the Grand Strategy Matrix are in excellent strategic position

15. Model of Grand Strategy Matrix
Rapid Market
Growth
Quadrant 1
Market Development
Market penetration
Product Development
Forward Integration
Backward Integration
Horizontal Integration
Vertical Integration
Related Diversification
Quadrant 2
Market Development
Market Penetration
Product Development
Horizontal Integration
Divestiture
Liquidation
Weak
Competitive
Position
Strong
Competitive
Position
Quadrant 3
Retrenchment
Related Diversification
Unrelated Diversification
Divestiture
Liquidation
Quadrant 4
Related diversification
Unrelated Diversification
Joint Venture
Slow Market
Growth

16. Factors that Shape Market Attractiveness
Forces
Competitive
Environment
Market
Access
Market Size
Number of Competitor
Customer Familiarity
Growth Rate
Price Rivalry
Channel Access
Buyer Power
Ease of Entry
Sales Requirements

17. Market Attractiveness Index
Market Forces
Factor Importance : 30%
Relative
Importance
Attractiveness Rating
Attractiveness Score
Market Size
40% 80 32
Growth Rate
30% 60 18
Buyer Power 40 12
Total
100 62
Competitive Env’
Factor Importance : 40%
Relative
Importance
Attractiveness Rating
Attractiveness Score
Price Rivalry
50% 40 20
Ease of Competitor Entry
30% 12
Number of Competitor 60
Total
100 44

18. Attractiveness Rating Market Attractiveness
Market Access
Factor Importance : 30%
Relative
Importance
Attractiveness Rating
Attractiveness Score
Customer Familiarity
40% 80 32
Channel Access
100 40
Sales/Service Requirement
20% 60 12
Total 84
Market Attractiveness Index = (30% x 62) + (40% x 44) + (30% x 84)
= = 61
Market Attractiveness
Very
Unattractive
Somewhat
Unattractive
Somewhat
Attractive
Very
Attractive
Unattractive
Attractive

19. Factors that Influence Competitive Position
Differentiation Position
Cost Position
Marketing Position
Product Quality
Unit Cost
Market Share
Service Quality
Transaction Cost
Brand Awareness
Brand Image
Marketing Expenses
Distribution

20. Competitive Position Index
Differentiation Position
Factor Importance : 40%
Relative
Importance
Attractiveness Rating
Attractiveness Score
Product Quality
40% 80 32
Service Quality
30% 60 18
Brand Image 24
Total
100 74
Cost Position
Factor Importance : 40%
Relative
Importance
Attractiveness Rating
Attractiveness Score
Cost of Good Sold
70% 40 28
Marketing & Sales Exp’
20% 60 12
Overhead Expenses
10% 6
Total
100 46

21. Attractiveness Rating
Marketing Position
Factor Importance : 20%
Relative
Importance
Attractiveness Rating
Attractiveness Score
Market Share
40% 40 16
Brand Awareness
30% 12
Distribution 20 6
Total
100 34
Competitive Position Index = (40% x 74) + (40% x 46) + (20% x 34)
= = 55
Competitive Position
Considerably
Weak
Clearly
Weak
Somewhat
Weak
Somewhat
Strong
Clearly
Strong
Considerably
Strong

22. The Decision Stage The Quantitative Strategic Planning Matrix QSPM
Step 1 : Make a list of the firm’s external opportunities/threats and Internal strength/weaknesses in the left column of the QSPM, information from EFE and IFE minimum 10 key success factor.
Step 2 : Assign weights to each external and internal factors
Step 3 : Examine the stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing.
Step 4 : Identify the attractiveness scores (AS), AS are determined by examining each key factors and asking : “Does this factor effect the choice of strategies being made ?” AS is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive and 4 = highly attractive
Step 5 : Compute the Total Attractive Scores (TAS)
Step 6 : Compute the Sum Total Attractive Scores

23. Strategic Alternative
The Quantitative Strategic Planning Matrix - QSPM
Key Factors
Weight
Strategic Alternative
Strategy 1
Strategy 2
Strategy 3
External Factors
Economy
Political / Legal / Gov’
Social / Cultural / Demogr’
Technological
Competitive
Internal Factors
Management
Marketing
Finance / Accounting
Production / Operation
MIS
Perhatikan Tabel QSPM di Buku 1 hal 226.