The document discusses strategic analysis and choice, providing a three-stage framework for choosing among alternative strategies. It describes various analytical tools that can be used in each stage: the input stage uses SWOT, IFE, and CPM matrices; the matching stage uses SWOT, SPACE, BCG, IE, and grand strategy matrices; and the decision stage uses the QSPM matrix. The tools help generate alternative strategies, evaluate them objectively, and select the most attractive strategies to pursue.

1. StrategyStrategy
Analysis andAnalysis and
ChoiceChoice
Chapter Six
BY:MADDY.KALEEM

2. Chapter Objectives
1. Describe a three-stage framework for
choosing among alternative strategies.
2. Explain how to develop a SWOT Matrix,
SPACE Matrix, BCG Matrix, IE Matrix, and
QSPM.
3. Identify important behavioral, political,
ethical, and social responsibility
considerations in strategy analysis and
choice.
BY:MADDY.KALEEM
6-2

3. Chapter Objectives
4. Discuss the role of intuition in strategic
analysis and choice.
5. Discuss the role of organizational culture
in strategic analysis and choice.
6. Discuss the role of a board of directors in
choosing among alternative strategies.
BY:MADDY.KALEEM
6-3

4. A Comprehensive Strategic-
Management Model
BY:MADDY.KALEEM
6-4

5. The Process of Generating and
Selecting Strategies
Nature of Strategy Analysis & Choice
 Establishing long-term objectives
• Generating alternative strategies
• Selecting strategies to pursue
• Best alternative – achieve mission & objectives
BY:MADDY.KALEEM
6-5

6.  Vision
 Mission
 Objectives
 External audit
 Internal audit
 Past successful strategies
Strategy Analysis & Choice
Alternative Strategies Derive From:
Ch 7 -6 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -6

7. Strategy Analysis & Choice
Generating Alternatives
• Participation in generating alternative strategies should
be as broad as possible
• Alternative strategies proposed by participants should be
considered, discussed, and ranked in order of
attractiveness
Ch 7 -7 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -7

8. The Strategy-Formulation
Analytical Framework
BY:MADDY.KALEEM
6-8

9. Comprehensive Strategy-Formulation Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage
Ch 7 -9 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -9

10. A Comprehensive Strategy-
Formulation Framework
Stage 1 - Input Stage
 summarizes the basic input information
needed to formulate strategies
 consists of the EFE Matrix, the IFE Matrix,
and the Competitive Profile Matrix (CPM)
BY:MADDY.KALEEM
6-10

11. Strategy-Formulation Analytical Framework
Internal Factor Evaluation
Matrix (IFE)
External Factor Evaluation
Matrix (EFE)
Competitive Profile Matrix
(CPM)
Stage 1:
The Input Stage
Ch 7 -11 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -11

12. A Comprehensive Strategy-
Formulation Framework
Stage 2 - Matching Stage
 focuses on generating feasible alternative
strategies by aligning key external and internal
factors
 techniques include the Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix, the
Strategic Position and Action Evaluation
(SPACE) Matrix, the Boston Consulting Group
(BCG) Matrix, the Internal-External (IE) Matrix,
and the Grand Strategy Matrix
BY:MADDY.KALEEM
6-12

13. Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -13 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -13

14. Matching Key External and Internal Factors
to Formulate Alternative Strategies
BY:MADDY.KALEEM
6-14

15. SWOT Matrix
1. List the firm’s key external opportunities
2. List the firm’s key external threats
3. List the firm’s key internal strengths
4. List the firm’s key internal weaknesses
5. Match internal strengths with external
opportunities
BY:MADDY.KALEEM
6-15

16. The Matching Stage
The Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix
helps managers develop four types of
strategies:
 SO (strengths-opportunities) Strategies
 WO (weaknesses-opportunities) Strategies
 ST (strengths-threats) Strategies
 WT (weaknesses-threats) Strategies
BY:MADDY.KALEEM
6-16

17. SO Strategies
Use a firm’s
internal strengths
to take advantage
of external
opportunities
SO
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -17 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-17

18. WO Strategies
Improving internal
weaknesses by
taking advantage
of external
opportunities
WO
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -18 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-18

19. ST Strategies
Use a firm’s
strengths
to avoid or
reduce the impact
of external
threats
ST
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -19 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-19

20. WT Strategies
Defensive tactics
aimed at reducing
internal
weaknesses &
avoiding
environmental
threats
WT
Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 7 -20 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-20

21. SWOT MatrixStrengths –
S
List Strengths
Weaknesses –
W
List Weaknesses
Opportunities –
O
List Opportunities
SO
Strategies
Use strengths to
take advantage of
opportunities
WO Strategies
Overcoming
weaknesses by taking
advantage of
opportunities
Threats – T
List Threats
ST
Strategies
Use strengths to
avoid threats
WT Strategies
Minimize weaknesses
and avoid threats
Ch 7 -21 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -21

22. A SWOT Matrix for a Retail
Computer Store
BY:MADDY.KALEEM
6-22

23. A SWOT Matrix for a Retail
Computer Store
BY:MADDY.KALEEM
6-23

24. 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
Ch 7 -24 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-24

25. Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -25 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -25

26. SPACE Matrix
Strategic Position & Action Evaluation Matrix
4-quadrants indicate whether the most appropriate
strategy is:
• Aggressive
• Conservative
• Defensive
• Competitive
Ch 7 -26 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -26

27. The SPACE Matrix
BY:MADDY.KALEEM
6-27

28. The Strategic Position and Action
Evaluation (SPACE) Matrix
Two internal dimensions (financial
position [FP] and competitive position
[CP])
Two external dimensions (stability
position [SP] and industry position [IP])
Most important determinants of an
organization’s overall strategic position
BY:MADDY.KALEEM
6-28

29. Factors That Make Up the
SPACE Matrix Axes
BY:MADDY.KALEEM
6-29

30. Factors That Make Up the
SPACE Matrix Axes
BY:MADDY.KALEEM
6-30

31. Steps to Develop a SPACE Matrix
1. Select a set of variables to define
financial position (FP), competitive
position (CP), stability position (SP), and
industry position (IP)
BY:MADDY.KALEEM
6-31

32. Steps to Develop a SPACE Matrix
2. Assign a numerical value ranging from +1
(worst) to +7 (best) to each of the
variables that make up the FP and IP
dimensions.
Assign a numerical value ranging from –1
(best) to –7 (worst) to each of the
variables that make up the SP and CP
dimensions
BY:MADDY.KALEEM
6-32

33. Steps to Develop a SPACE Matrix
3. Compute an average score for FP, CP, IP, and
SP
4. Plot the average scores for FP, IP, SP, and CP
on the appropriate axis in the SPACE Matrix
5. Add the two scores on the x-axis and plot the
resultant point on X. Add the two scores on the
y-axis and plot the resultant point on Y. Plot the
intersection of the new xy point
BY:MADDY.KALEEM
6-33

34. Steps to Develop a SPACE Matrix
6. Draw a directional vector from the origin
of the SPACE Matrix through the new
intersection point
 This vector reveals the type of strategies
recommended for the organization:
aggressive, competitive, defensive, or
conservative
BY:MADDY.KALEEM
6-34

35. Example Strategy Profiles
BY:MADDY.KALEEM
6-35

36. Example Strategy Profiles
BY:MADDY.KALEEM
6-36

37. Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -37 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -37

38. The Boston Consulting Group
(BCG) Matrix
BCG Matrix
 graphically portrays differences among
divisions in terms of relative market share
position and industry growth rate
 allows a multidivisional organization to
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
organization
BY:MADDY.KALEEM
6-38

39. The BCG Matrix
BY:MADDY.KALEEM
6-39

40. The BCG Matrix
Question marks – Quadrant I
 Organization must decide whether to
strengthen them by pursuing an intensive
strategy (market penetration, market
development, or product development) or to
sell them
BY:MADDY.KALEEM
6-40

41. BCG Matrix
Stars
• High relative market share and high growth rate
- Best long-run opportunities for growth &
profitability
• Substantial investment to maintain or
strengthen dominant position
- Integration strategies, intensive strategies,
joint ventures
Ch 7 -41 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -41

42. BCG Matrix
Cash Cows
• High relative market share, competes in low-growth
industry
- Generate cash in excess of their needs
- Milked for other purposes
• Maintain strong position as long as possible
- Product development, concentric diversification
- If weakens – retrenchment or divestiture
Ch 7 -42 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -42

43. BCG Matrix
Dogs
• Low relative market share, competes in slow or
no market growth
- Weak internal & external position
• Liquidation, divestiture, retrenchment
Ch 7 -43 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -43

44. The BCG Matrix
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
BY:MADDY.KALEEM
6-44

45. Strategy-Formulation Analytical Framework
SWOT Matrix
SPACE Matrix
BCG Matrix
IE Matrix
Grand Strategy Matrix
Stage 2:
The Matching Stage
Ch 7 -45 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -45

46. The Internal-External Matrix
 Positions an organization’s various
divisions in a nine-cell display
 Similar to BCG Matrix except the IE
Matrix:
- Requires more information about the divisions
- Strategic implications of each matrix are
different
Ch 7 -46 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-46

47. The Internal-External (IE) Matrix
BY:MADDY.KALEEM
6-47

48. IE Matrix
 Based on two key dimensions
- The IFE total weighted scores on the x-axis
- The EFE total weighted scores 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
Ch 7 -48 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
6-48

49. The IE Matrix
BY:MADDY.KALEEM
6-49

50. Ch 7 -50 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
50

51. Strategy-Formulation Analytical Framework
SPACE Matrix
BCG Matrix
IE Matrix
Stage 2:
The Matching Stage
SWOT Matrix
Grand Strategy Matrix
Ch 7 -51 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -51

52. The Grand Strategy Matrix
Grand Strategy Matrix
 based on two evaluative dimensions:
• competitive position and
• market (industry) growth
BY:MADDY.KALEEM
6-52

53. The Grand Strategy Matrix
BY:MADDY.KALEEM
6-53

54. 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
 unable to compete effectively
 need to determine why the firm’s current
approach is ineffective and how the company
can best change to improve its competitiveness
BY:MADDY.KALEEM
6-54

55. The Grand Strategy Matrix
Quadrant III
 must make some drastic changes quickly to
avoid further decline and possible liquidation
 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
BY:MADDY.KALEEM
6-55

56. Strategy-Formulation Analytical Framework
Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix
(QSPM)
Ch 7 -56 Copyright © 2011 Pearson Education
BY:MADDY.KALEEM
Ch 6 -56

57. A Comprehensive Strategy-
Formulation Framework
Stage 3 - Decision Stage
 involves the Quantitative Strategic Planning
Matrix (QSPM)
 reveals the relative attractiveness of
alternative strategies and thus provides
objective basis for selecting specific
strategies
BY:MADDY.KALEEM
6-57

58. The Quantitative Strategic
Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix
(QSPM)
 objectively indicates which alternative
strategies are best
 uses input from Stage 1 analyses and
matching results from Stage 2 analyses to
decide objectively among alternative
strategies
BY:MADDY.KALEEM
6-58

59. The Quantitative Strategic
Planning Matrix (QSPM)
BY:MADDY.KALEEM
6-59

60. 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 alternative strategies that the
organization should consider implementing
BY:MADDY.KALEEM
6-60

61. Steps in a QSPM (cont.)
4. Determine the Attractiveness Scores (AS)
5. Compute the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness
Score
BY:MADDY.KALEEM
6-61

62. Positive Features of the QSPM
Sets of strategies can be examined
sequentially or simultaneously
Requires strategists to integrate pertinent
external and internal factors into the
decision process
Can be adapted for use by small and
large for-profit and nonprofit
organizations
BY:MADDY.KALEEM
6-62

63. Limitations of the QSPM
Always requires intuitive judgments and
educated assumptions
Only as good as the prerequisite
information and matching analyses upon
which it is based
BY:MADDY.KALEEM
6-63

64. A QSPM for a Retail
Computer Store
BY:MADDY.KALEEM
6-64

65. A QSPM for a Retail
Computer Store
BY:MADDY.KALEEM
6-65

66. 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
BY:MADDY.KALEEM
6-66

67. The Politics of Strategy Choice
The hierarchy of command in an
organization, combined with the career
aspirations of different people and the
need to allocate scarce resources,
guarantees the formation of coalitions of
individuals who strive to take care of
themselves first and the organization
second, third, or fourth
BY:MADDY.KALEEM
6-67

68. Tactics to Aid Strategists
BY:MADDY.KALEEM
6-68

69. Governance Issues
Board of directors
 a group of individuals who are elected by the
ownership of a corporation to have oversight
and guidance over management and who
look out for shareholders’ interests
BY:MADDY.KALEEM
6-69

70. Board of Director Duties and
Responsibilities
BY:MADDY.KALEEM
6-70

71. Principles of Good Governance
1. No more than two directors are current or
former company executives
2. The audit, compensation, and nominating
committees are made up solely of outside
directors
3. Each director owns a large equity stake in
the company, excluding stock options
4. Each director attends at least 75 percent of
all meetings
BY:MADDY.KALEEM
6-71

72. Principles of Good Governance
5. The board meets regularly without
management present and evaluates its own
performance annually
6. The CEO is not also the chairperson of the
board
7. Stock options are considered a corporate
expense
8. There are no interlocking directorships (where
a director or CEO sits on another director’s
board)
BY:MADDY.KALEEM
6-72