The document outlines a three-stage framework for strategic analysis and choice, focusing on evaluating current strategies and identifying improvement areas using various matrices such as SWOT, SPACE, BCG, IE, and QSPM. It emphasizes the importance of aligning internal and external factors to formulate feasible strategies while considering behavioral, political, ethical, and social responsibility aspects in decision-making. Additionally, it highlights the challenges of political maneuvering in strategy selection and the need for objective analysis to determine the best strategic options.

1. Topic 6: Strategic Analysis and
Choice
SOURCE: FRED R. DAVID,14TH
EDITION, STRATEGIC MANAGEMENT, CONCEPTS AND CASES,

2. Learning objectives
 Describe a three-stage framework for choosing among
alternative strategies.
 Explain how to develop a SWOT Matrix, SPACE Matrix,
BCG Matrix, IE Matrix, and QSPM.
 Identify important behavioral, political, ethical, and
social responsibility considerations in strategy analysis
and choice.

3. Strategy analysis and choice
- alternative strategies derive from;
Strategic analysis involves evaluating an organizations current
strategy to determine its effectiveness and identify areas of
improvement.
 Vision
 Mission
 Objective
 External audit
 Internal audit
 Past successful strategies

4. The strategy –formulation analytical
framework

5. Strategy formulation framework
- stage 1 – input stage
 Summarizes the basic input information needed
to formulate strategies.
 Consists of EFE (external factor evaluation) Matrix
. The IFE (Internal factor evaluation) Matrix, and
the Competitive Profile Matrix (CPM).

6. THE INPUT STAGE
1. External Factor Evaluation EFE: a strategic management tool used to
evaluate the company’s external environment. It helps in identifying
and assessing the impact of external factors both opportunities and
treats that affects an organizational performance.
2. Internal Factor Evaluation IFE: strategic management tool used to
assess the internal environment by focusing on evaluating the
company’s strengths and weaknesses on how well it has fully utilize its
resources.
3. CPM Competitive Profile Matrix (CPM): strategic management tool
used to evaluate and compare a company’s competitive position
relating to its major competitors.

7. Strategy formulation framework
- stage 2 – matching stage
 Focuses on generating feasible alternative strategies by
aligning key external and internal factors.
 Techniques includes the SWOT Matrix, the Strategic
Position and Action Evaluation Matrix (SPACE), the
Boston Consulting Group (BCG) Matrix, the Internal-
External (IE) Matrix and the Grand Strategy Matrix.

8. SWOT Matrix
 List the firm’s key external opportunities
 List the firm’s key external threats
 List the firm’s key internal strengths
 List the firm’s key internal weaknesses
 Match internal strengths with external opportunities.
 Thus SWOT helps managers develop four types of strategies;
 SO (strength-opportunities) strategies
 WO (weaknesses-opportunities) strategies
 ST (strengths-threats) strategies
 WT (weaknesses-threats) strategies

9. Limitations with SWOT matrix
 Does not show how to achieve a competitive
advantage
 Provides a static assessment in time
 May lead the firm to overemphasize a single
internal or external factor in formulating
strategies.

10. Space Matrix
 4-quadrants indicate whether the most appropriate strategy is:
 Aggressive – a strong competitive position and favorable industrial
environment. Some of its strategies are; market penetration, market
and product development, innovation etc..
 Conservative – a strong internal environment but low growth and
competitive strength. This are businesses not generating good cash
flow and cannot achieve growth.
 Defensive: a strategic position with high growth but low
competitive strength.
 Competitive: High growth, high competitive strength. A good
position in rapid growing industry that has strong competitive
position and can capitalize on the growth opportunities available.

11. The Space Matrix

12. Factors that make up the space
matrix axes

13. Stage 2 – The Matching Stage - (A) BCG matrix
 Graphically portrays differences
among divisions in terms of relative
market share position and industry
growth rate.
 Allows a multinational organisation
manage its portfolio of businesses by
examining the relative market share
position and the industry growth rate
of each division relative to all other
divisions in the organisation.
 Relative market shares are in four positions;
1. Market Share
2. Market growth rate

14. The BCG Matrix
Note: The major benefit of the
BCG Matrix is that it draws
attention to the cash flow,
investment characteristics, and
needs of an organization's various
divisions

15. The Internal –External Matrix - The Matching Stage
 Positions an organization's
various divisions in a nine-cell
display.
 Similar to BCG Matrix except
the IE Matrix:
I. requires more information
about the divisions
II. strategic implications of
each matrix are different
 Based on two key dimensions;
I. the IFE total weighted scores on
the x-axis
II. the EFE total weighted score on
the y-axis
 Divided into three major regions;
 Grow and build – cells I, II or IV
 Hold and maintain – Cells III, V, or
VII
 Harvest or divest – cells VI, VIII, or
IX.

16. The internal – external (IE) matrix

17. The Grand Matrix
 A tool used to evaluate a company’s strategic options by placing
them into a grid that helps in assessing their potential based on
two key evaluation dimensions:
1. Market (industry) Growth: This dimension assesses the attractiveness
of the industry or market in which the company operates. It
considers whether the market is growing, stable, or declining.
2. Competitive Position: This dimension evaluates the company's
current position in the market relative to competitors. It considers
factors like market share, brand strength, and resource
capabilities.

18. The Grand Strategy Matrix
 Quadrant I – continued concentration on current markets (market
penetration and market development) and products (product
development) is an appropriate strategy.
 Quadrant II – (a) unable to complete effectively, and (b) need to
determine why the firm’s current approach is ineffective and how
the company can best change to improve its competitiveness
 Quadrant III – (a) must make some drastic changes quickly to
avoid further decline and possible liquidation, and (b) extensive
cost and asset reduction (retrenchment) should be pursued first.
 Quadrant IV – have characteristically high cash-flow levels and
limited internal growth needs and often can pursue related or
unrelated diversification successfully.

19. The Grand Strategy Matrix

20. The Decision Stage – Stage 3
 Involves the Quantitative Strategic Planning Matrix (QSPM)
 Reveals the relative attractiveness of alternative strategies
and thus provides objective basis for selecting specific
strategies.
 QSPM – (a) objectively indicates which alternative strategies
are best, (b) uses input from stage 1 analysis and matching
results from stage 2 analyses to decide objectively among
alternative strategies.

21. Steps in a QSPM
1. Make a list of the firm’s key external opportunities/threats and internal
strengths/weaknesses in the left column of the QSPM.
2. Assign weights to each key external and internal factor
3. Examine the stage 2 (matching) matrices, and identify strategies that
the organisation should consider implementing.
4. Determine the attractiveness scores (AS)
5. Compute the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness Score.

22. The Quantitative Strategic Planning
Matrix - QSPM

23. The Politics of Strategy Choice
 Political maneuvering consumes valuable time, subverts
organizational objectives, diverts human energy, and results in the
loss of some valuable employees.
 Political biases and personal preferences get unduly embedded in
strategy choice decisions.
 The hierarchy of command in an organisation, combined with the
career aspirations of different people and the need to allocate
scare resources, guarantees the formation of coalitions of
individuals who strive to take care of themselves first and the
organisation second, third, or fourth.

24. The End