Strategic Management complete course...

1. JahanUniversity
BachelorofBusinessAdministration
Departmentof BusinessAdministration
Subject: Strategic Management
Lecture# 7th Strategy Generation and Selection
Lecturer: Hijratullah Tahir
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2. Objectives of the lecture
After completion of this lecture students will be able to know:
1. Strategy analysis and choice process.
2. Three-stage strategy-formulation analytical framework.
3. SWOT Matrix, SPACE Matrix, BCG Matrix and IE Matrix.
4. Grand Strategy Matrix and QSP Matrix.
5. Organizational culture in strategic analysis and choice.
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3. Outline of the lecture
Topic 1 : Describe the strategy analysis and choice process.
Topic 2 : Three-stage strategy-formulation analytical framework.
Topic 3 : Explain SWOT, SPACE, BCG, IE Matrix.
Topic 4 : Grand Strategy Matrix and QSP Matrix
Topic 5 : Role of organizational culture in strategic analysis and
choice.
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4. The Strategy Analysis and Choice Process
• Focuses on generating and evaluating alternative strategies,
• Develop alternative action to achieve firm’s mission and objectives.
• Firms used strategic statements along with internal and external audit
information to generate and evaluate alternative strategies.
• Approach is used to avoid an organizational crisis.
• Rudin’s Law states, “When a crisis forces choosing among alternatives,
most people choose the worst possible one.”
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5. The Process of Generating and Selecting strategies
• Feasible alternatives are infinite in numbers.
• Strategists, select most attractive alternative strategies.
• The advantages, disadvantages, trade-offs costs, and benefits of these
strategies should be determined.
• Identifying and evaluating alternative strategies should involve many of
the managers and employees who developed mission and objectives.
• Representatives from each department and division must participate
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6. The Strategy Formulation Analytical Frame work
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7. Stage 1 – the Input stage
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• Procedures for developing an EFE Matrix, an IFE Matrix, and a CPM.
• Derived Information derived from the EFE Matrix, IFE Matrix, and CPM
• Keep strategy formulation process in mind
• Good intuitive judgment is always needed in determining appropriate
weights and ratings,
• Keep in mind, 50 percent more important than a rating of 2, so small
differences matter.

8. Stage 2 – the matching stage
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• Match organization’s internal resources and skills and the
opportunities and risks created by its external factors.
• Consists of 5 techniques: the SWOT Matrix, the SPACE Matrix, the
BCG Matrix, the IE Matrix, and the Grand Strategy Matrix.
• Matching external and internal key factors is the essential for
effectively generating feasible alternative strategies.

9. Stage 3 – The Decision Stage
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• Participants could individually rate strategies on a 1-to-4 scale as to
desirability, and
• Then sum the ratings from all participants,
• Prioritized list of the best strategies could be achieved.
• However, the QSPM, described later in this chapter, offers a more
robust procedure to determine the relative attractiveness of
alternative strategies.

10. SWOT Matrix
•Strategists develop four types of strategies: SO, WO, ST & WT Strategies.
• Matching key external and internal factors is the most difficult part.
•SO strategies use a firm’s internal strengths to take advantage of EO.
•WT strategies to get into a situation in which firm can apply SO strategies.
•WO strategies aim at improving IW by taking advantage of EO.
•ST strategies use a firm’s strengths to avoid or reduce the impact of ET.
•WT strategies are defensive tactics directed at reducing IW &avoiding ET.
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11. SPACE Matrix
• Its four-quadrant framework indicates whether aggressive,
conservative, defensive, or competitive strategies.
• Two internal dimensions; Financial Position and Competitive Position,
External dimensions; Stability Position & Industry Position.
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12. SPACE Matrix
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13. SPACE Matrix - Process
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1. Select a set of variables to define; FP, CP, SP and IP.
2. Assign ranging +1 (worst) to +7 (best) to each variables on FP and IP and
ranging from –1 (best) to –7 (worst) on SP and CP dimensions.
• On the FP and CP axes, make comparisons to competitors.
• On the IP and SP axes, make comparisons to other industries.
• On the SP axis, know that a denotes highly unstable industry
conditions, whereas –1 denotes highly stable.

14. SPACE Matrix - Process
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3. Compute an average score for FP, CP, IP, and SP by summing the values
given to the variables of each dimension and then by dividing by the
number of variables included in the respective dimension.
4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis
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 (x, y) coordinate.

15. SPACE Matrix - Process
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6. Draw a directional vector from the origin of the SPACE Matrix (0,0)
through the new (x, y) coordinate. That vector, being located in a
particular quadrant, reveals particular strategies the organization should
consider.

16. BCG Matrix
• When a firm’s divisions compete in different industries, a separate
strategy often must be developed for each business.
• The BCG Matrix graphically portrays differences among divisions based
on two dimensions:
1. Relative market share position on the x-axis and
2. Industry growth rate on the y-axis.
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17. Question Marks
• Quadrant I (upper right) have a low relative market share
position, yet they compete in a high-growth industry.
• Generally these firms’ cash needs are high and their cash
generation is low.
• Intensive strategy (market penetration, market development, or
product development) or to sell them.
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18. Stars
• Quadrant II (upper left) represent the organizations’
• Best long-run opportunities for growth and profitability, and are
therefore called stars.
• High relative market share and a high industry growth rate should
receive substantial investment to maintain or strengthen their dominant
positions.
• Forward, backward, and horizontal integration;
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19. Cash Cows
• Divisions in Quadrant III (lower left)
• High relative market share position but low-growth industry.
• Called cash cows because they generate cash in excess of their needs,
they are often milked.
• Many of today’s cash cows were yesterday’s stars.
• However, as a cash cow division becomes weak, retrenchment or
divestiture can become more appropriate.
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20. Dogs
• Quadrant IV (lower right)
• Low relative market share position and compete in a slow- or no-market-
growth industry; they are dogs in the firm’s portfolio.
• Because of their weak internal and external position, these businesses
are often liquidated, divested, or trimmed down through retrenchment.
• When a division first becomes a dog, retrenchment can be the best
strategy to pursue because many dogs have bounced back.
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21. BCG Matrix
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22. The Internal-External Matrix
• The IE Matrix is similar to the BCG Matrix in that both tools involve
plotting a firm’s divisions in a schematic diagram;
1. The x and y axes are different.
2. The IE Matrix requires more information about the divisions than
does the BCG Matrix.
3. The strategic implications of each matrix are different.
4. The IE Matrix has nine quadrants versus four in a BCG Matrix.
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23. The Grand Strategy Matrix
• All organizations can be positioned in one of the Grand Strategy Matrix’s
four strategy quadrants.
1. Competitive position on the x-axis and
2. Market (industry) growth on the y-axis.
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24. The Grand Strategy Matrix
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25. Quantitative Strategic Planning Matrix
• Decision or 3rd Stage of strategy-formulation analytical framework
• The QSPM is a tool, to evaluate alternative strategies, based on
previously identified external and internal key success factors.
• Left column of a QSPM consists of key external and internal factors
(from Stage 1), and
• Top row consists of feasible alternative strategies (from Stage 2).
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26. Quantitative Strategic Planning Matrix
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27. 4. Bargaining Power of Suppliers
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• Affects the intensity of competition in an industry, especially when
there are few suppliers.
• Both suppliers and producers are interested to assist each other with
reasonable prices, improved quality, enhancing long-term profitability.
• Firms may pursue a backward integration strategy to gain control or
ownership of suppliers.

28. 5. Bargaining Power of Consumer
• When customers; buy in volume then affect intensity of competition in
an industry.
• Rival firms may offer extended warranties or special services to gain
customer loyalty.
• Bargaining power are higher when the products being undifferentiated.
• consumers often can negotiate selling price, warranty coverage, etc.
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29. Forecasting Tools and Techniques
• Forecasts are educated assumptions about future trends and events.
• Forecasting is a complex activity because of factors such as
technological innovation, cultural changes, new products, improved
services, stronger competitors, shifts in government priorities, etc.
• Techniques are;
1. Making Assumptions
2. Business Analytics
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30. The External Factor Evaluation Matrix
Summarize and evaluate External Factors; Five steps are;
1. List 20 key external factors; both opportunities and threats,
2. Assign to each factor a weight that ranges from 0.0 (not imp.) to 1.0 (V Imp.)
3. Assign a rating between 1 and 4 to each key external factor
4. Multiply each factor’s weight by its rating to determine a weighted score.
5. Sum the weighted scores for each variable to determine the total weighted
score for the organization.
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31. The Competitive Profile Matrix
• Identifies a firm’s major competitors and its particular S&W
• The weights and total weighted scores, both CPM & EFE have the same
meaning. While, CPM include both internal and external issues;
• Ratings refer to strengths and weaknesses, where; 4= major strength, 3
= minor strength, 2 = minor weakness, and 1 = major weakness.
• CPM, the ratings and total weighted scores for rival and sample firms c.
• CPM analysis provides important internal strategic information.
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32. Conclusion
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• Every organization should be wary of becoming a prisoner of its own
strategy, for even the best strategies become obsolete sooner or later.
• Regular reappraisal of strategy helps management avoid complacency.
• An organization with no sense of direction and no coherent strategy
precipitates its own demise.
• When an organization does not know where it wants to go, it usually
ends up some place it does not want to be.

33. References
1. Strategic Management Concepts and Cases Sixteen Edition by
Fred R. David.
2. Fundamental of Business Management Process by Marlon
Dumas and Jan Mandelling.
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