1. Topic 6, Problems and Alternatives Strategic Analysis and Decision Making Methods of Analysis to find and select strategies. –Cluster Analysis –TOWS Matrix –SPACE matrix (Strategic Position and Action Evaluation Matrix) –Portfolio Analysis Boston Consulting Group IE (Internal and External) Matrix-- For class use the General Electric Business Screen (an IE-type matrix)

2. Cluster Analysis and TOWS Cluster Analysis is the bringing together of the most important Strengths, Weaknesses, Opportunities and Threats to identify problems. (Core and Distinctive Competencies and Critical Success Factors are likely to be in your Cluster Analysis.) When you make a matrix out of SWOT items we call it a TOWS matrix which identifies potential strategic alternative types--SO, WO, ST, WT ( strategies).

3. TOWS TOWS MATRIX is not used to pick alternatives but to give an idea of potential problems, and opportunities and the strategies to overcome or exploit those Opportunities and Threats.

4. 4 The TOWS Matrix List strengthsList weaknesses STRENGTHS - SWEAKNESSES - W OPPORTUNITIES - OSO STRATEGIESWO STRATEGIES THREATS - TST STRATEGIES WT STRATEGIES List opportunities Use strengths to take advantage of opportunities Overcome weaknesses by taking advantage of opportunities List threats Use strengths to avoid threats Minimize weaknesses and avoid threats ©1999 Prentice Hall

5. Portfolio Analysis Treats product lines or SBU’s as potential investments. Portfolio Analysis methods include: –Boston Consulting Group (BCG)-Growth Share Matrix—This company is one of largest strategic consulting companies in U.S. –GE Matrix (Similar to IE Matrix–value of the GE Matrix over IE Matrix is that once you plot your company on the Matrix, locations on matrix are associated with best strategies to pick, and types of strategic leadership to initiate strategy.) –Product/Market Evolution Matrix (Not in text)

6. BCG Growth-Share Matrix BCG Portfolio Matrix StarsQuestion Marks Cash CowsDogs 22 20 18 16 14 12 10 8 6 4 2 0 10x 4x2x 1.5x 1x 0.5x0.4x0.3x0.2x0.1x Relative Competitive Position Business Growth Rate (Percent) Each Circle represents a division of the company, circle size. is proportionate to corporate revenue generated by the division. When wedges are used, they indicate % of corporate profits represented by the division.

7. BOSTON CONSULTING GROUP (BCG) the following model is more commonly used and the text explanation applies to this model. I Quadrant --Question Marks –low market share, hi growth –use intensive strategies such as market penetration, market development, product development

8. 8 The BCG Matrix Relative Market Share Position in the Industry Industry Sales Growth Rate (Percent) High +20 Medium 0 Low -20 High Medium Low 1.0.50 0.0 Question Marks (I) Dogs (IV) Stars (II) Cash Cows (III) ?

9. Quadrant II, Stars High Market Share –High Industry Growth Rate –Use backward and forward integration, horizontal integration, market penetration, market development, product development and joint ventures Quadrant III, Cash Cows - High Market Share, –Low Industry Growth Rate –Use product development or Diversification

10. Quadrant IV, Dogs Low industry Growth Rate, and Low Market Share –Use retrenchment, liquidation, divestment –Circle size represents industry size, and darkened area represents your companies share of market This portfolio analysis indicates that companies evolve over time in counter- clockwise fashion— question marks, stars, cash cows, dogs. Weaknesses of this model are that it does not indicate if industry is growing, and your stars also may not be a fit with your competencies

11. Portfolio Analysis using General Electric Business Screen, similar to IE Matrix in text. Uses industry attractiveness and business competitive strength on axes Circles represent industry sales, wedge represents companies share of market Product or SBU position on graph indicates type of strategy likely to be best choice. We can use IFE weighted score and EFE weighted scores for axes

12. General Electric Business Screen General Electric’s Business Screen -- Position on Graph’s can help you determine strategy. – See next slide. A Winners B C Question Marks D F Average Businesses E Winners Losers G H Profit Producers StrongAverageWeak Low Medium High Business Strength/Competitive Position Industry Attractiveness Source: Adapted from Strategic Management in GE, Corporate Planning and Development, General Electric Corporation. Used by permission of General Electric Company.

14. Internal Factor Evaluation (IFE) Internal Factors Weight Rating Weighted Score Comments 12345 1.00 Strengths Weaknesses Total Weighted Score

15. Internal Factor Evaluation (IFE): Maytag as Example Internal Factors Weight Rating Weighted Score Comments 12345 1.00 Strengths Quality Maytag culture Experienced top management Vertical integration Employee relations Hoover’s international orientation Weaknesses Process-oriented R&D Distribution channels Financial position Global positioning Manufacturing facilities Total Weighted Score Quality key to success Know appliances Dedicated factories Good, but deteriorating Hoover name in cleaners Slow on new products Superstores replacing small dealers High debt load Hoover weak outside the United Kingdom and Australia Investing now 3.05.15.05.10.05.15.05.15.20.05 54433222245443322224.75.20.40.15.45.10.30.40.20

16. External Factor Evaluation (EFE) 3P External Strategic Factors Weight Rating Weighted Score Comments 12345 1.00 Opportunities Threats Total Weighted Score Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 Associates. Reprinted by permission Please note that this Matrix goes from 1.0 to 5.0

17. External Factor Evaluation Matrix Summary (EFE): Maytag as Example 3P.17External Factor Analysis Summary (EFAS): Maytag as Example (Table 3.4)p. 76 External Strategic Factors Weight Rating Weighted Score Comments 1.00 Opportunities Economic integration of European Community Demographics favor quality appliances Economic development of Asia Opening of Eastern Europe Trend to “Super Stores” Threats Increasing government regulations Strong U.S. competition Whirlpool and Electrolux strong globally New product advances Japanese appliance companies Total Scores.20.10.05.10.15.05.10 45122443124512244312.80.50.05.10.20.40.45.05.20 Acquisition of Hoover Maytag quality Low Maytag presence Will take time Maytag weak in this channel Well positioned Hoover weak globally Questionable Only Asian presence is Australia 3.15 12345

18. Product/Market Evolution Matrix On one axis, matrix has five to six stages -- development, growth, shakeout, maturity/saturation, and decline stages. Has on other axis, competitive position, either strong, average or weak This matrix shows at what stage in development your various SBU’s or your product lines should be placed. Size of circles indicates how much of your sales come from that SBU or product line. Companies want to have a good mix of products in development thru maturity stages.

19. Styles of Corporate Governance 2.17Styles of Corporate Governance Entrepreneurship management Partnership management Chaos management Marionette management Degree of Involvement By Top Management Degree of Involvement By Board of Directors High Low High