The Quantitative Strategic Planning Matrix (QSPM) is a strategic management technique used to evaluate and compare feasible alternative strategies. It uses inputs from the external and internal analyses in Stage 1 and the matching of strengths, weaknesses, opportunities, and threats in Stage 2 to objectively determine the most attractive strategies in Stage 3. The QSPM assigns weights and attractiveness scores to key factors to calculate total attractiveness scores for each strategy, identifying the one with the highest score as most desirable considering all relevant internal and external influences.

1. 1
Stage1: The Input Stage:
• External Factor Evaluation (EFE) Matrix: A list of the firm’s key external Opportunities/Threats
• Internal Factor Evaluation (IFE) Matrix: A list of the firm’s key internal Strengths/Weaknesses
• Competitive Profile Matrix(CPM): Compares the firm &its rivals & their relative Strengths/Weakness
Stage2: The Matching Stage:
• TOWS Matrix: Matching S/W/O/T to produce: SO – ST – WO – WT strategies.
• (SPACE) Matrix: Indicates Aggressive, Conservative, Defensive, or Competitive strategies.
• BCG Matrix (CPM): Dogs – Cows – Stars – Question Marks.
• Internal-External (IE) Matrix: Divisional Analysis.
• Grand Strategy Matrix: Company’s Strategic Position.
Stage3: The Decision Stage:
• Quantitative Strategic Planning Matrix (QSPM): Relative Attractiveness of Feasible Alternative
Actions

2. 2
o Other than ranking strategies to achieve the prioritized list, there is only one analytical technique
in the literature designed to determine the relative attractiveness of feasible alternative actions.
This technique is the Quantitative Strategic Planning Matrix (QSPM), which comprises Stage 3 of
the strategy-formulation analytical framework.
o This technique objectively indicates which alternative strategies are best.
o The QSPM uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide
objectively among alternative strategies.
o That is, the EFE Matrix, IFE Matrix, and Competitive Profile Matrix that make up Stage 1, coupled
with the SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and Grand Strategy Matrix that
make up Stage 2, provide the needed information for setting up the QSPM (Stage 3).
o The QSPM is a tool that allows strategists to evaluate alternative strategies objectively, based on
previously identified external and internal critical success factors.
o Like other strategy-formulation analytical tools, the QSPM requires good intuitive judgment
Another Answer:
• Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach for
evaluating possible strategies.
• Quantitative Strategic Planning Matrix or a QSPM provides an analytical method for comparing feasible
alternative actions.
• The QSPM method falls within so-called stage 3 of the strategy formulation analytical framework.
• When company executives think about what to do, and which way to go, they usually have a prioritized
list of strategies. If they like one strategy over another one, they move it up on the list. This process is very
much intuitive and subjective. The QSPM method introduces some numbers into this approach making it a
little more "expert" technique.
• The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select the best
strategy using input from other management techniques and some easy computations.
• In other words, the QSPM method uses inputs from stage 1 analyses, matches them with results from
stage 2 analyses, and then decides objectively among alternative strategies.
Stage 1 strategic management tools...
The first step in the overall strategic management analysis is used to identify key strategic factors. This can
be done using, for example, the EFE matrix and IFE matrix.
Stage 2 strategic management tools...
After we identify and analyze key strategic factors as inputs for QSPM, we can formulate the type of the
strategy we would like to pursue. This can be done using the stage 2 strategic management tools, for
example the SWOT analysis (or TOWS), SPACE matrix analysis, BCG matrix model, or the IE matrix model.

3. 3
Stage 3 strategic management tools...
The stage 1 strategic management methods provided us with key strategic factors. Based on their analysis,
we formulated possible strategies in stage 2. Now, the task is to compare in QSPM alternative strategies
and decide which one is the most suitable for our goals.
The stage 2 strategic tools provide the needed information for setting up the Quantitative Strategic
Planning Matrix - QSPM. The QSPM method allows us to evaluate alternative strategies objectively.
Conceptually, the QSPM in stage 3 determines the relative attractiveness of various strategies based on
the extent to which key external and internal critical success factors are capitalized upon or improved. The
relative attractiveness of each strategy is computed by determining the cumulative impact of each
external and internal critical success factor.
The 6 steps to develop a QSPM:
Step 1 Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the
left column of the QSPM. This information should be taken directly from the EFE Matrix and IFE Matrix.
A minimum of 10 external key success factors and 10 internal key success factors should be included in the QSPM.
Step 2 Assign weights to each key external and internal factor. These weights are identical to those in the
EFE Matrix and the IFE Matrix. The weights are presented in a straight column just to the right of the external
and internal critical success factors.
Step 3 Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization
should consider implementing. Record these strategies in the top row of the QSPM.
Group the strategies into mutually exclusive sets if possible.
Step 4 Determine the Attractiveness Scores (AS) defined as numerical values that indicate the relative
attractiveness of each strategy in a given set of alternatives. Attractiveness Scores (AS) are determined by
examining each key external or internal factor, one at a time, and asking the question
“Does this factor affect the choice of strategies being made?”
a. If the answer to this question is yes, then the strategies should be compared relative to that key factor.
The range for Attractiveness Scores is: 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive,
and 4 = highly attractive.

4. 4
By attractive, we mean the extent that one strategy, compared to others, enables the firm to either capitalize on the
strength, improve on the weakness, exploit the opportunity, or avoid the threat. Work row by row in developing a QSPM.
b. If the answer to the previous question is no, then the respective key factor has no effect on our decision.
If the key factor does not affect the choice being made at all, then the Attractiveness Score would be 0.
Step 5 Compute the Total Attractiveness Scores. Total Attractiveness Scores (TAS) are defined as the
product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row. The Total
Attractiveness Scores indicate the relative attractiveness of each alternative strategy, considering only the
impact of the adjacent external or internal critical success factor. The higher the Total Attractiveness Score,
the more attractive the strategic alternative (considering only the adjacent critical success factor).
Step 6 Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy
column of the QSPM. The Sum Total Attractiveness Scores (STAS) reveal which strategy is most attractive in
each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external
and internal factors that could affect the strategic decisions. The magnitude of the difference between the
Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative desirability of one
strategy over another.
Example #1

5. 5

6. 6
Positive features of QSPM:
1. Sets of strategies can be examined sequentially or simultaneously.
o For example, corporate-level strategies could be evaluated first, followed by division-level strategies, and
then function-level strategies.
o There is no limit to the number of strategies that can be evaluated or the number of sets of strategies that
can be examined at once using the QSPM.
2. The relevant internal & external factors are integrated in the decision making process.
o Developing a QSPM makes it less likely that key factors will be overlooked or weighted inappropriately.
o A QSPM draws attention to important relationships that affect strategy decisions.
3. A QSPM provides a framework to prioritize the strategies.
4. A QSPM can be adapted for use by small and large for-profit and nonprofit organizations so can be
applied to virtually any type of organization.
o A QSPM can especially enhance strategic choice in multinational firms because many key factors and
strategies can be considered at once.
o It also has been applied successfully by a number of small businesses.
Limitations of the QSPM:
1. Intuitive judgments & educated assumptions are required in assigning attractiveness scores.
2. The effectiveness of the QSPM depends on the prerequisite inputs from previous stages.
3. Only those strategies are evaluated that are related to one another in a given set.
4. Also, the sum total attractiveness scores can be really close such that a final decision is not clear.

7. 7
• Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market
space and create new demand.
• It is about creating and capturing uncontested market space, thereby making the competition irrelevant.
• It is based on the view that market boundaries and industry structure are not a given and can be
reconstructed by the actions and beliefs of industry players.
• To break the trade-off between differentiation and low cost and to create a new value curve, there
are four key questions to challenge an industry’s strategic logic and business model:
1. Which of the factors that the industry takes for granted should be eliminated?
2. Which factors should be reduced well below the industry’s standard? (ex. Price)
3. Which factors should be raised well above the industry’s standard? (ex. Quality)
4. Which factors should be created that the industry has never offered? (innovation)

8. 8
• The first principle of blue ocean strategy is to reconstruct market boundaries to break from the
competition and create blue oceans.
• There are six basic approaches to remaking market boundaries.
• These paths have general applicability across industry sectors, and they lead companies into the
corridor of commercially viable blue ocean ideas.
1. Path 1: Look Across Alternative Industries. (Not on Rivals within industry)
2. Path 2: Look Across Strategic Groups Within Industries. (Not on Competitive position within group)
3. Path 3: Look Across the Chain of Buyers. (Redefine buyer group Not on better serving them)
4. Path 4: Look Across Complementary Product & Service Offerings. (Not on value within bounds)
5. Path 5: Look Across Functional or Emotional Appeal to Buyers. (Rethink Not improve price)
6. Path 6: Look Across Time. (Shaping external trends over time Not adapting to trend changes)

9. 9
• According to Porter, the nature of competitiveness in a given industry can be viewed as a composite
of five forces:
1. Rivalry among competing firms
2. Potential entry of new competitors
3. Potential development of substitute products
4. Bargaining power of suppliers
5. Bargaining power of consumers
• The following three steps for using Porter’s Five-Forces Model can indicate whether
competition in a given industry is such that the firm can make an acceptable profit:
1. Identify key aspects or elements of each competitive force that impact the firm.
2. Evaluate how strong and important each element is for the firm.
3. Decide whether the collective strength of the elements is worth the firm entering
or staying in the industry.

10. 10
:
Re-structuring Reengineering
Also Called Downsizing, Rightsizing, or Delayering.
Process Management, Process Innovation, or
Process Redesign.
Action
Involves reducing the size of the firm in terms of
number of employees, number of divisions or units,
and number of hierarchical levels in the firm’s
organizational structure.
Involves reconfiguring or redesigning work, jobs, and
processes, changing the way work is actually carried
out.
Purpose To improve both efficiency and effectiveness. improving cost, quality, service, and speed.
Concerned
with
Shareholder well-being. Employee and Customer well-being.
Effect on
Organization
Structure
Eliminating or Establishing, Shrinking or Enlarging,
and Moving organizational departments and
divisions.
Does not usually affect the organizational structure
or chart, nor does it imply job loss or employee
layoffs.
Decisions
Strategic (long-term, affecting all business functions)
decisions.
Tactical (short-term, business-function-specific)
decisions.
Vertical Integration Expansion
Strategy
Horizontal Integration Expansion
Strategy
Strategic
direction
Forward integration, backward integration are
collectively referred to as vertical integration
strategies.
Mergers, acquisitions, and takeovers among
competitors
Scope
Gaining control over distributors, suppliers, and/or
retailers
Seeking ownership of or increased control over a firm’s
competitors.
Advantages
1. Boost profit.
2. Allow immediate access to consumers.
3. Reduce costs across various parts of
production.
4. Ensure tighter quality control.
5. Better flow and control of information across
the supply chain.
6. Better control over production volume.
1. Expand in size.
2. Diversify product offerings.
3. Expand into new markets.
4. Increased market share.
5. Larger consumer base.
6. Increased revenue.
7. Reduced competition.
8. Synergistic efforts (combined marketing efforts,
technology, etc.).
9. Create economies of scales and economies of
scope.
10. Reduce production costs.
Disadvantages
1. Concentrates resources and prospects in one
approach.
2. High organizational and coordination costs
1. High level of scrutiny from government
agencies.
2. Creation of a monopoly.
3. Higher prices for consumers.
4. Less options for consumers.
5. Reduced flexibility for the new, larger company.
6. Lack of alignment between company values
destroys overall company value.

11. 11
• Definition: A matrix structure is the most complex of all designs because it depends upon both vertical
and horizontal flows of authority and communication (hence the term matrix).
• A typical matrix structure is illustrated in Figure 7-5.
• Note that the letters (A through Z4) refer to managers.
• For example, if you were manager A, you would be responsible for financial aspects of Project 1, and you would
have two bosses: the Project 1 Manager on site and the CFO off site.
• Advantages & Disadvantages of Matrix Organizational Structure:
• For a matrix structure to be effective, organizations need participative planning, training, clear mutual
understanding of roles and responsibilities, excellent internal communication, and mutual trust and confidence.
• The matrix structure is being used more frequently by U.S. businesses because firms are pursuing strategies that
add new products, customer groups, and technology to their range of activities.
• Out of these changes are coming product managers, functional managers, and geographic-area managers, all of
whom have important strategic responsibilities.
• When several variables, such as product, customer, technology, geography, functional area, and line of business,
have roughly equal strategic priorities, a matrix organization can be an effective structural form.

12. 12

13. 13
1. Integration Strategies
Forward
Integration
Gaining ownership or
increased control over
Distributors or Retailers
1• When an organization’s present distributors are especially expensive, or unreliable,
or incapable of meeting the firm’s distribution needs.
2• When the availability of quality distributors is so limited as to offer a competitive
advantage to those firms that integrate forward.
3• When an organization competes in an industry that is growing and is expected to
continue to grow markedly; this is a factor because forward integration reduces an
organization’s ability to diversify if its basic industry falters.
4• When an organization has both the capital and human resources needed to manage
the new business of distributing its own products.
5 • When the advantages of stable production are particularly high; this is a
consideration because an organization can increase the predictability of the demand
for its output through forward integration.
6• When present distributors or retailers have high profit margins; this situation
suggests that a company profitably could distribute its own products and price them
more competitively by integrating forward.
Backward
Integration
Seeking ownership or
increased control of a
firm’s Suppliers.
1• When an organization’s present suppliers are especially expensive, or unreliable, or
incapable of meeting the firm’s needs for parts, components, assemblies, or raw
materials.
2 • When the number of suppliers is small and the number of competitors is large.
3 • When an organization competes in an industry that is growing rapidly; this is a
factor because integrative-type strategies (forward, backward, and horizontal) reduce
an organization’s ability to diversify in a declining industry.
4 • When an organization has both capital and human resources to manage the new
business of supplying its own raw materials.
5. When the advantages of stable prices are particularly important; this is a factor
because an organization can stabilize the cost of its raw materials and the associated
price of its product(s) through backward integration.
6• When present supplies have high profit margins, which suggests that the business of
supplying products or services in the given industry is a worthwhile venture.
7• When an organization needs to quickly acquire a needed resource.
Horizontal
Integration
Seeking ownership of or
increased control over a
firm’s Competitors
1• When an organization can gain monopolistic characteristics in a particular area or
region without being challenged by the federal government for “tending substantially”
to reduce competition.
2• When an organization competes in a growing industry.
Mergers, acquisitions, and
takeovers among
competitors allow for
increased economies of scale
and enhanced transfer of
resources and competencies
3• When increased economies of scale provide major competitive advantages.
4 • When an organization has both the capital and human talent needed to successfully
manage an expanded organization.
5• When competitors are faltering due to a lack of managerial expertise or a need for
particular resources that an organization possesses; note that horizontal integration
would not be appropriate if competitors are doing poorly, because in that case overall
industry sales are declining

14. 14
2. Intensive Strategies
1. Market Penetration
Seeks to increase market share
for present products or
services in present markets
through greater marketing
efforts
1• When current markets are not saturated with a particular
product or service.
2• When the usage rate of present customers could be
increased significantly
3. When the market shares of major competitors have been
declining while total industry sales have been increasing.
4• When the correlation between dollar sales and dollar
marketing expenditures historically has been high.
5• When increased economies of scale provide major
competitive advantages.
2. Market Development
introducing present products
or services into new
geographic areas.
1• When new channels of distribution are available that are
reliable, inexpensive, and of good quality.
2 • When an organization is very successful at what it does.
3 • When new untapped or unsaturated markets exist.
4• When an organization has the needed capital and human
resources to manage expanded operations.
5 • When an organization has excess production capacity.
6• When an organization’s basic industry is rapidly becoming
global in scope.
3. Product
Development
Seeks increased sales by
improving or modifying
present products or services.
1• When an organization has successful products that are in
the maturity stage of the product life cycle; the idea here is to
attract satisfied customers to try new (improved) products as a
result of their positive experience with the organization’s
present products or services.
2• When an organization competes in an industry that is
characterized by rapid technological developments.
3• When major competitors offer better-quality products at
comparable prices.
4 • When an organization competes in a high-growth industry.
5• When an organization has especially strong research and
development capabilities.

15. 15
4. Diversification Strategies
1. Related
Diversification
Businesses are said to be related
when their value chains posses
competitively valuable cross-
business strategic fits
1• When an organization competes in a no-growth or a slow-growth
industry.
2• When adding new, but related, products would significantly
enhance the sales of current products.
•Transferring competitively
valuable expertise, technological
know-how, or other capabilities
from one business to another.
3• When new, but related, products could be offered at highly
competitive prices.
• Combining the related activities
of separate businesses into a single
operation to achieve lower costs.
4• When new, but related, products have seasonal sales levels that
counterbalance an organization’s existing peaks and valleys.
• Exploiting common use of a well-
known brand name.
5• When an organization’s products are currently in the declining
stage of the product’s life cycle.
• Cross-business collaboration to
create competitively valuable
resource strengths and capabilities
6• When an organization has a strong management team.
2. Unrelated
Diversification
Businesses are said to be unrelated
when their value chains are so
dissimilar that no competitively
valuable cross-business
relationships exist
1• When revenues derived from an organization’s current products
or services would increase significantly by adding the new,
unrelated products.
2• When an organization competes in a highly competitive and/or a
no-growth industry, as indicated by low industry profit margins and
returns.
3• When an organization’s present channels of distribution can be
used to market the new products to current customers.
4• When the new products have countercyclical sales patterns
compared to an organization’s present products.
5• When an organization’s basic industry is experiencing declining
annual sales and profits.
• Capitalizing on a portfolio of
businesses that are capable of
delivering excellent financial
performance in their respective
industries
6• When an organization has the capital and managerial talent
needed to compete successfully in a new industry.
7• When an organization has the opportunity to purchase an
unrelated business that is an attractive investment opportunity.
8• When there exists financial synergy between the acquired and
acquiring firm. (Note that a key difference between related and
unrelated diversification is that the former should be based on some
commonality in markets, products, or technology, whereas the
latter should be based more on profit considerations.)
9• When existing markets for an organization’s present products are
saturated.
10• When antitrust action could be charged against an organization
that historically has concentrated on a single industry

16. 16
4. Defensive Strategies
1. Retrenchment
When an organization regroups through cost
and asset reduction to reverse declining sales
and profits. Sometimes called a turnaround or
reorganizational strategy
1• When an organization has a clearly distinctive
competence but has failed consistently to meet its
objectives and goals over time.
Sometimes called a turnaround or
reorganizational strategy, retrenchment is
designed to fortify an organization’s basic
distinctive competence.
2• When an organization is one of the weaker
competitors in a given industry.
During retrenchment, strategists work with
limited resources and face pressure from
shareholders, employees, and the media.
3 • When an organization is plagued by inefficiency,
low profitability, poor employee morale, and pressure
from stockholders to improve performance.
Selling off land and buildings to raise needed
cash, pruning product lines, closing marginal
businesses, closing obsolete factories,
automating processes, reducing the number of
employees, and instituting expense control
systems.
4• When an organization has failed to capitalize on
external opportunities, minimize external threats, take
advantage of internal strengths, and overcome internal
weaknesses over time; that is, when the organization’s
strategic managers have failed (and possibly will be
replaced by more competent individuals).
5• When an organization has grown so large so quickly
that major internal reorganization is needed.
2. Divestiture
Selling a division or part of an organization
1• When an organization has pursued a retrenchment
strategy and failed to accomplish needed
improvements.
Divestiture often is used to raise capital for
further strategic acquisitions or investments
2• When a division needs more resources to be
competitive than the company can provide.
to rid an organization of businesses that are
unprofitable, that require too much capital, or
that do not fit well with the firm’s other
activities
3• When a division is responsible for an organization’s
overall poor performance.
4• When a division is a misfit with the rest of an
organization; this can result from radically different
markets, customers, managers, employees, values, or
needs.
to focus on their core businesses and become
less diversified
5 • When a large amount of cash is needed quickly and
cannot be obtained reasonably from other sources.
6• When government antitrust action threatens an
organization.
3. Liquidation
Selling all of a company’s assets, in parts, for
their tangible worth
1• When an organization has pursued both a
retrenchment strategy and a divestitute strategy, and
neither has been successful.
Liquidation is a recognition of defeat and
consequently can be an emotionally difficult
strategy.
2• When an organization’s only alternative is
bankruptcy. Liquidation represents an orderly and
planned means of obtaining the greatest possible cash
for an organization’s assets. A company can legally
declare bankruptcy first and then liquidate various
divisions to raise needed capital.
However, it may be better to cease operating
than to continue losing large sums of money.
3• When the stockholders of a firm can minimize their
losses by selling the organization’s assets.

17. 17
• The Balanced Scorecard is an important strategy-evaluation tool.
• It is a process that allows firms to evaluate strategies from four perspectives:
1. Financial performance
2. Customer knowledge
3. Internal business Processes
4. Learning & Growth
• The Balanced Scorecard analysis requires that firms seek answers to the following questions
and utilize that information, in conjunction with financial measures, to adequately and more
effectively evaluate strategies being implemented:
1. How well is the firm continually improving and creating value along measures such as innovation,
technological leadership, product quality, operational process efficiencies, and so on?
2. How well is the firm sustaining and even improving upon its core competencies and competitive
advantages?
3. How satisfied are the firm’s customers?
• The Balanced Scorecard approach to strategy evaluation aims to balance:
o Long-term with Short-term concerns,
o Financial with Non-financial concerns,
o Internal with External concerns.
Best Wishes