V – STRATEGIC MATRICES
Decision making tools
The chapter focuses on decision-making tools and strategic business models used in
international strategy.
Tools include internal and external analysis, SWOT analysis, and portfolio matrices.
Internal analysis: Examines the firm's value chain, resources, and capabilities.
External analysis: Uses Porter's Five Forces to assess the competitive environment.
SWOT Analysis evaluates a firm's strengths, weaknesses, opportunities, and threats.
Portfolio matrices help companies prioritize business units and product lines.
SWOT Analysis
STRENGHTS WEAKNESSES
(Maintain) (Correct)
Management capacity Bad reputation
Trained staff Difficulty accessing distribution
Patented technology channels
Good relations with clients Little advertising effort
Availability of financial resources Reduced market share
Adequate financing structure High product costs
High motivation of the staff Profitability below the industry
Good product portfolio average
OPPORTUNITIES THREATS
(Explore) (Face)
High rate of market growth Existence of substitute products
Abundant possibilities of industry Ease of entry of new competitors
segmentation Rapid changes in the needs and
Ease of access to external markets tastes of consumers
Location within an industrial district Poor economic situation
with many common services Devaluation of the price of money
Sector of suppliers with high Deficient general infrastructures
capacity for innovation Huge bureaucracy to develop
business
Strategic Directions
Defensive strategies – Address weaknesses and threats.
Offensive strategies – Leverage strengths to capitalize
on opportunities.
Survival strategies – Overcome threats and
weaknesses.
Redirecting strategies – Adjust business positioning.
Tesla’s SWOT Analaysis
Matrices. Boston consulting group
BCG Matrix
It can be used to determine what priorities should be given in the product portfolio of a
business unit. To ensure long-term value creation, the firm should have a portfolio of products
that contains both high-growth products (future) and low-growth products (generate cash).
The basic idea is that the bigger the market share a product has or the faster the product's
market grows the better is for the company
It is based in two key variables.
Market growth
o Measures the attractiveness of the market.
o Reflects the product life cycle and the investments needed.
(Sales∈current year −Sales∈ previous year )
o Market growthrate= ¿
Sales∈ previous year ¿
Market share
o Is the % of the total market that is being serviced by your product
o Reflects the profitability and revenues generation of the strategic unit.
Sales of firm X
o Market share=
Sales of main competitor
BGC matrix helps firms prioritize product lines/business units based on market growth and
market share.
Stars (High market share, High growth): Require high investment but generate revenue
(e.g., iPhone).
Cash Cows (High market share, Low growth): Generate stable cash flow, funding other
units (e.g., iTunes, MacBook).
Question Marks (Low market share, High growth): Need investment to become Stars
or may fail (e.g., Apple TV).
Dogs (Low market share, Low growth): Weak performers that may need to be divested
(e.g., iPod).
BCG position through product life cycle
Coca-cola Mcdonald’s
New BCG Model – "Sustain & Optimize"; "Niche & Pivot”; "Scale & Lead"; and "Experiment & Innovate".
MATRICES & GELB?
Matrices. McKinsey
McKinsey Matrix helps businesses evaluate competitive position and industry attractiveness.
Competitive Position Factors
Strengths in branding
Financial resources
Product quality
Customer satisfaction.
Industry Attractiveness Factors
Market growth
Size
Barriers to entry
Competition levels.
Steps to Develop an External Factor Evaluation (EFE) Matrix
1. Identify key external factors (opportunities & threats) (SWOT, PESTEL, Porter's Five Forces).
2. Assign weights (0-1) based on industry relevance.
3. Give a rating (1-4) for the firm's effectiveness in handling each factor.
4. Multiply weight × rating.
5. Sum total to assess competitive standing.
Total weighted scores
Below 2.5 point that the firm has less average ability to respond to external factors.
Above 2.5 indicate a strong ability respond
Factor Evaluation Matrix – FORD example
Competitive Profile Matrix: Automobile sector
Valuing competitive position Valuing industry attractiveness
Matrices ADL
Arthur D. Little (ADL) Matrix – Maps business strategy based on industry maturity and competitive
position.
Four Industry Stages
1. Introduction: High investment risk, uncertain growth.
2. Growth: Expanding market, increasing revenues.
3. Maturity: Stable market, established competitors.
4. Decline: Shrinking demand, potential divestment.
Competitive Positions
Dominant: Industry leader, strong market presence.
Strong: Competitive advantage, aggressive growth.
Favorable: Moderate success, selective market push.
Tenable: Niche markets, limited growth.
Weak: Struggling business, possible divestment.
Strategic Actions
Growing businesses should invest heavily.
Mature businesses should hold market share.
Declining businesses may need to divest or withdraw.
Organic/ADL
ADL Matrix. Apple product portfolio
Final Summary
SWOT Analysis – helps assess internal and external factors.
BCG Matrix – evaluates products based on market share and growth.
McKinsey Matrix – measures competitive strength and industry attractiveness.
ADL Matrix – determines strategy based on industry life cycle and competitive position.
