Chapter 6
Strategy Analysis & Choice
Strategic Management:
Concepts & Cases
13th Edition
Global Edition
Fred David
Ch 6 -1
Ch 6 -2
Strategy Analysis & Choice
n Subjective decisions based on objective
information
n Generating alternative strategies
n Selecting strategies to pursue
n Best alternative course of action to
achieve mission & objectives
n Derived from vision, mission, objectives,
external audit, and internal audit
Ch 6 -3
Strategy Analysis & Choice
Generating Alternatives –
Participation in generating alternative
strategies should be as broad as
possible
Ch 6 -4
Comprehensive Strategy-
Formulation Framework
n Stage 1 - Input Stage
q EFE Matrix
q IFE matrix
n Stage 2 - Matching Stage
q SWOT
q SPACE matrix
q BCG matrix
q IE Matrix
q Grand strategy matrix
n Stage 3 - Decision Stage
q QSPM
Ch 6 -5
Strategy-Formulation Framework
External Factor Evaluation
Matrix (EFE)
Stage 1:
The Input Stage
Internal Factor Evaluation
Matrix (IFE)
Ch 6 -6
Stage 2: The Matching Stage
nMatch between organization’s internal
resources & skills and the opportunities &
risks created by its external factors
Ch 6 -7
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix
The Matching Stage
IE Matrix
Grand Strategy Matrix
Ch 6 -8
Stage 2: The Matching Stage
SWOT Matrix
nStrengths
nWeaknesses
nOpportunities
nThreats
Ch 6 -9
SWOT Matrix
Four Types of Strategies
nStrengths-Opportunities (SO)
nWeaknesses-Opportunities (WO)
nStrengths-Threats (ST)
nWeaknesses-Threats (WT)
Ch 6 -10
SWOT Matrix
n SO strategies use a firm’s internal strengths
to take advantage of external opportunities
n WO strategies improve internal weaknesses
by taking advantage of external opportunities
n ST strategies use a firm’s strengths to avoid
or reduce the impact of external threats
n WT strategies defensive tactics aimed at
reducing internal weakness and avoiding
external threats
Ch 6 -11
Limitations with SWOT Matrix
n Does not show how to achieve a competitive
advantage
n Provides a static assessment in time
n May lead the firm to overemphasize a single
internal or external factor in formulating
strategies
Ch 6 -12
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix
The Matching Stage
IE Matrix
Grand Strategy Matrix
Ch 6 -13
SPACE Matrix
Strategic Position & Action Evaluation Matrix
nAggressive
nConservative
nDefensive
nCompetitive
Ch 6 -14
SPACE Matrix
n Internal dimensions
q Financial position (FP)
q Competitive position (CP)
n External dimensions
q Environmental position (EP)
q Industry position (IP)
Ch 6 -15
Ch 6 -16
Ch 6 -17
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix
The Matching Stage
IE Matrix
Grand Strategy Matrix
Ch 6 -18
BCG Matrix
Boston Consulting Group Matrix
nAssists multidivisional firm in formulating
strategies
nAutonomous divisions = business portfolio
nDivisions may compete in different industries
nFocus on relative market-share position &
industry growth rate
Ch 6 -19
BCG Matrix
n Question Marks – low relative market share
in a high-growth industry
n Stars – high relative market share in a high-
growth industry
n Cash Cows – high relative market share in a
low-growth industry
n Dogs – Low relative market share in a slow or
no growth industry
Ch 6 -20
Ch 6 -21
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix
The Matching Stage
IE Matrix
Grand Strategy Matrix
Ch 6 -22
The Internal-External Matrix
n Positions an organization’s various divisions
in a nine-cell display
n Similar to BCG Matrix except the IE Matrix:
q Requires more information about the divisions
q Strategic implications of each matrix are different
Ch 6 -23
Ch 6 -24
IE Matrix
n Based on two key dimensions
q The IFE total weighted scores on the x-axis
q The EFE total weighted scores on the y-axis
n Divided into three major regions
q Grow and build – Cells I, II, or IV
q Hold and maintain – Cells III, V, or VII
q Harvest or divest – Cells VI, VIII, or IX
Ch 6 -25
Strategy-Formulation Framework
SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix
The Matching Stage
IE Matrix
Grand Strategy Matrix
Ch 6 -26
Grand Strategy Matrix
n Tool for formulating alternative
strategies
n Based on two dimensions
q Competitive position
q Market growth
Ch 6 -27
RAPID MARKET GROWTH
Quadrant II Quadrant I
1. Market development 1. Market development
2. Market penetration 2. Market penetration
3. Product development 3. Product development
4. Horizontal integration 4. Forward integration
5. Divestiture 5. Backward integration
6. Liquidation 6. Horizontal integration
WEAK 7. Related diversification
STRONG
COMPETITIVE COMPETITIVE
POSITION Quadrant III Quadrant IV POSITION
1. Retrenchment 1. Related diversification
2. Related diversification 2. Unrelated diversification
3. Unrelated diversification 3. Joint ventures
4. Divestiture
5. Liquidation
SLOW MARKET GROWTH
Ch 6 -28
Grand Strategy Matrix
Quadrant I
nExcellent strategic position
nConcentrationon current
markets/products
nTakerisks aggressively when
necessary
Ch 6 -29
Grand Strategy Matrix
Quadrant II
nEvaluate present approach
nHow to improve
competitiveness
nRapid market growth requires
intensive strategy
Ch 6 -30
Grand Strategy Matrix
Quadrant III
nCompete in slow-growth industries
nWeak competitive position
nDrastic changes quickly
nCost & asset reduction
(retrenchment)
Ch 6 -31
Grand Strategy Matrix
Quadrant IV
nStrong competitive position
nSlow-growth industry
nDiversification
to more
promising growth areas
Ch 6 -32
Strategy-Formulation Analytical
Framework
Quantitative Strategic
Stage 3: Planning Matrix
The Decision Stage (QSPM)
Ch 6 -33
QSPM
Quantitative Strategic Planning Matrix
nTechnique designed to determine
the relative attractiveness of feasible
alternative actions
Ch 6 -34
QSPM Strategic Alternatives
Key External Factors Weight Strategy 1 Strategy 2 Strategy 3
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/
Environmental
Technological
Competitive
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Management Information
Systems
Ch 6 -35
Steps to Develop a QSPM
1. Make a list of the firm’s key external
opportunities/threats and internal
strengths/weaknesses in the left column
2. Assign weights to each key external and
internal factor
Ch 6 -36
Steps to Develop a QSPM
3. Examine the Stage 2 (matching) matrices,
and identify alternative strategies that the
organization should consider implementing
4. Determine the Attractiveness Scores
5. Compute the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness
Score
Ch 6 -37
QSPM
Advantages
nSets of strategies considered
simultaneously or sequentially
nIntegration of relevant external &
internal factors in the decision-
making process
Ch 6 -38
QSPM
Limitations
nRequires intuitive judgments &
educated assumptions
nOnly as good as the prerequisite
inputs
Ch 6 -39
Cultural Aspects of Strategy
Choice
Organization Culture
nA set of values, beliefs, attitudes,
customs, norms, personalities,
heroes and heroines that describe a
firm
nSuccessful strategies depend on
support of the firm’s culture
Ch 6 -40
Politics of Strategy Choice
Politics in Organizations
nHierarchy of command
nCareer aspirations
nAllocation of scarce resources
Ch 6 -41
Governance Issues
Board of Directors Roles & Responsibilities
nControl & oversight over management
nAdherence to legal prescriptions
nConsideration of stakeholders’ interests
nAdvancement of stockholders’ rights
Ch 6 -42
