The document provides an overview of various strategic management tools and matrix analyses that can be used for strategic planning. It discusses the external factor analysis summary (EFAS) table and internal factor analysis summary (IFAS) table for analyzing external opportunities/threats and internal strengths/weaknesses. It also covers other tools like STEEP/PESTEL analysis, Porter's five forces, value chain analysis, TOWS matrix, SPACE matrix, grand strategy matrix, BCG matrix, quantitative strategic planning matrix (QSPM). Examples are provided for many of these tools including EFAS, IFAS, TOWS matrix, industry matrix, SPACE matrix and QSPM. The document provides a comprehensive reference for strategic management methodology and matrix analyses
3. EFAS Table (External Factors
Analysis Summary Table)
ď‚— Used to present the external factors influencing the
organization in terms of Opportunities (+ve impact) &
Threats (-ve impact).
ď‚— These factors are sourced from:
â—¦ STEEP/ PESTEL Analysis for the general environment
â—¦ Five forces of Porter for the task environment
â—¦ Issues priority Matrix
ď‚— The impact of each factors (weighted score)is
calculated as multiplication of its factors weight (out of
1,00) & given rate (1-5).
ď‚— The overall impact is calculated as the sum of weighted
score of all factors.
ď‚— The interpretation of the total weighted score is based
on benchmarking it against 3.5 standard.
4. STEEP (PESTEL) Analysis
STEEP Analysis- monitoring trends in the
societal and natural environments
â—¦ Sociocultural-
â—¦ Technological-
â—¦ Economic-
â—¦ Ecological-
â—¦ Political-Legal forces
7. Issues priority matrix
External strategic factors- key environmental trends that are
judged to have both a medium to high probability of occurrence
and a medium to high probability of impact on the corporation
Issues priority matrix-
used to identify and
analyze developments
in the external
environment
9. IFAS Table (Internal Factors
Analysis Summary Table)
ď‚— Used to present the external factors influencing the
organization in terms of strengths (+ve impact) &
weaknesses (-ve impact).
ď‚— These factors are sourced from:
â—¦ Value chain analysis (Activities analysis)
â—¦ Cultural analysis
â—¦ Structural Analysis
â—¦ Resources Analysis (functional analysis)
ď‚— The impact of each factors (weighted score)is
calculated as multiplication of its factors weight (out of
1,00) & given rate (1-5).
ď‚— The overall impact is calculated as the sum of weighted
score of all factors.
ď‚— The interpretation of the total weighted score is based
on benchmarking it against 3.5 standard.
12. Value Chain Analysis
1. Examine each product line’s value
chain in terms of the various
activities involved in producing the
product or service
2. Examine the linkages within each
product line’s value chain
3. Examine the potential synergies
among the value chains of different
product lines or business units
13. SFAS Table (Situational Factors
Analysis Summary Table)
SFAS summarizes an organization’s strategic factors by combining the
external factors from the EFAS Table with the internal factors from the
IFAS Table
15. How to Access the importance
of stakeholder concerns
1. How will this decision affect each
stakeholder?
2. How much of what stakeholders
want are they likely to get under the
alternative?
3. What are the stakeholders likely to
do if they don’t get what they want?
4. What is the probability that they will
do it?
17. Matrix Analyses (1)
Matrix Analyses Uses
1. Industry Matrix
= Competitive Profile
Matrix (CPM )
• Comparing the performance of the studied company with the
performance of other companies in the industry.
• These companies mostly are belonging to the same strategic group
• The comparison is based on the key success factors in this industry
by its defined weighted , impact on each company & weighted
average for each company
2. TOWS/SWOT • Identifying the current situation of the company based on its threats,
opportunities, strengths & weaknesses
• Develop alternative strategic matches = strategies (OS strategies,
Ow strategies, TS strategies, & TW strategies)
3. Situational Analysis =
SFAS- SFE
• Identifying the current situation of the company based on its threats,
opportunities, strengths & weaknesses
• This current situation is quantified as sum of weighted averages for
the given & rate for each threat, opportunity, weakness, & strength
• Selected threat, opportunity, weakness, & strength are usually the
highest weighted average in the external analysis (EFAS or EFE) &
in the internal analysis (IFAS or IFE)
4. SPACE Matrix • Identifying the current situation of the company based on External
dimensions ( Industry stability & Environmental Stability ) & internal
dimensions (competitive advantage & Financial stability)
• The identified current situation is either: aggressive, conservative,
defensive & Competitive
• Recommending relevant strategies for this position
18. Matrix Analyses (2)
Matrix Analyses Uses
5. Grand Strategy Matrix • Identifying the current situation of the company based on External
dimensions= Market Growth( Low & High ) & internal dimension=
Completive Position (Strong & weak)
• The identified current situation is either: Quadrant I, or Quadrant II
..etc.
• Recommending relevant strategies for this position
6. QSPM Matrix Comparing & prioritizing number of suggested strategies
Based on OT from EFAS & SW from IFAS with their weights, each for –
1,000
Given rates or attractiveness scores from 1-4 & Total attractiveness
scores
7. BCG • Portfolio Analysis matrix for business components: SBUs, Product
lines, …etc.
• Identifying the position of each as: Stars, Dogs, Cash cows or
Questions Mark based on the market share of the company & the
market growth of the industry.
• Suggesting relevant strategy for each.
8. GE • Portfolio Analysis matrix for business components: SBUs, Product
lines, …etc.
• Identifying the position of each based on the competitive position of
the company & the industry attractiveness.
• Suggesting relevant strategy for each.
9. STEEP= PESTEL
Analysis
• Analysis for the general (Societal) Environmental of an organization:
Socio-culture, Technological, Ecological, Economic, Political/ Legal)
20. TOWS Matrix
TOWS Matrix- illustrates how the external opportunities and threats
can be matched with internal strengths and weaknesses to
result in 4 possible strategic alternatives
27. How to Construct Space
Matrix?
1. Choose a set of variables to define industry strength (IS),
Environmental stability (ES), Competitive advantage (CA), and
financial strength (FS).
2. Assign numerical values to all the variables of FS and IS ranging
from +1(worst) to +6 (best).
3. Assign numerical values to all the variables of ES and CA ranging
from -1(best) to -6 (worst).
4. Calculate the scores for CA, ES, FS, and IS.
5. Plot the average for CA, ES, FS, and IS on the appropriate axis.
6. Now add the two scores on the Y-axis and plot the resultant point
on Y. Similarly add the two scores on the x axis and plot the
resultant point on X and Plot the intersection of the new XY point.
7. Sketch a directional vector from the origin of the SPACE Matrix
through the new intersection point. The vector shows the type of
strategies recommended for the organization: competitive,
conservative defensive, and aggressive.
29. Space Matrix Calculations
X Axis= Average ES Score (-1.83) + Average FS Score (+5.00) = +3.17
Y Axis= Average CA Score (-1.50) + Average IS Score (+5.00) = +3.50
30. Comment
According to the graph above, we noticed that the
Coca-Cola Company falls into the aggressive
quadrant of the SPACE matrix. It is located at the
coordinates of +3.50 for x-component and a y-
component of 3.17. It shows that the company has
an admirable position to use its IS in order to take
advantage of external opportunities, overcome
weaknesses, and avoid threats. So, in this position
Coca-Cola Company has set of possible strategies
such as market development, product development,
market penetration, forward integration, backward
integration, horizontal integration, horizontal
diversification, concentric diversification and
conglomerate diversification depending on detailed
conditions that face the company.
31. Comments on SPACE Related
Strategies (1)
ď‚— When an organization's directional vector is located in the
aggressive quadrant (upper-right quadrant) of the SPACE
Matrix:
â—¦ A firm is in an excellent position to use its internal strengths to (1) take
advantage of external opportunities, (2) overcome internal weaknesses,
and (3) avoid external threats.
â—¦ Therefore, market penetration, market development, product
development, backward integration, forward integration, horizontal
integration, conglomerate diversification, concentric diversification,
horizontal diversification, or a combination strategy all can be feasible,
depending on the specific circumstances that the company is facing at the
time.
ď‚— The directional vector may appear in the conservative
quadrant: (upper-left quadrant) of the SPACE Matrix:
â—¦ Which implies that staying close to the company's basic competencies
and not taking excessive risks should be the recommended strategy.
â—¦ Conservative strategies most often include market penetration, market
development, product development, and concentric diversification for
example.
32. Comments on SPACE Related
Strategies (2)
ď‚— The directional vector may be located in the lower-left
or defensive quadrant of the SPACE Matrix:
â—¦ Which suggests that the company might want to focus on
rectifying internal weaknesses and avoiding external
threats.
â—¦ Defensive strategies include retrenchment, divestiture,
liquidation, and concentric diversification.
ď‚— Finally, the directional vector may be located in the
lower-right or competitive quadrant of the SPACE
Matrix:
â—¦ Indicating competitive strategies would be most
appropriate. Competitive strategies include backward,
forward, and horizontal integration; market penetration;
market development; product development; and joint
venture, to name but a few. Understanding all of these
potential options can be a complicated and time consuming
undertaking.
35. Example of Apple Grand
Strategy- 2005
RAPID MARKET
GROWTH
Quadrant II Quadrant I
WEAK STRONG
COMPETITIVE COMPETITIVE
POSITION POSITION
Quadrant III Quadrant IV
SLOW MARKET
GROWTH
Apple
Computer-
2005
Concentric Diversification
Conglomerate
Diversification
Horizontal Diversification
Retrenchment
Divestiture
Liquidation
36. What is QSPM?
“Quantitative Strategic Planning Matrix”
ď‚— The Quantitative Strategic Planning Matrix is a strategic
tool which is used to evaluate alternative set of
strategies.
ď‚— The QSPM comes under the third stage of strategy
formulation which is called “The Decision Stage” and
also the final stage of this process.
ď‚— it extract the information from stage 1 The Input Stage
and stage 2 the the matching stage. The input stage is
based on EFE Matrix, IFE Matrix and CPM and stage 2
made up of TOWS matrix, SPACE Matrix, BCG Matrix,
IE Matrix, Grand Strategy Matrix.
ď‚— The QSPM combine the intuitive thinking of managers
with the analytical process to decide the best strategy
for the organization success.
37. How to Develop QSPM?
There are four main columns in QSPM:
ď‚— the left column list down the key internal and external
key factors which are same as in EFE and IFE matrix.
ď‚— Adjacent column to key factors is Weight (relative
importance of the factor) which hold the numeric value
obtained from EFE and IFE matrix weight column.
ď‚— The next to weight is AS stands for attractive score
assign priority to key factors using the numeric value 4
for most importance and 1 for least importance.
ď‚— The last column TAS (Total attractive score) is the value
calculated by multiplying weight by AS.
One thing important to note for each strategy separate AS
and TAS value added in the table, weight remain same for
all set of strategies mentioned in QSPM.
38. Steps to develop QSPM Matrix:
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 critical success factors and 10 internal critical success factors should be
included in the QSPM.
Step 2
ď‚— 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
ď‚— 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
ď‚— 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 are determined by
examining each keyexternal or internal factor, one at a time, and asking the question, “Does this factor
affect the choice of strategies being made?”
ď‚— The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably
attractive, and 4 = highly attractive.
ď‚— Use a dash to indicate that the key factor does not affect the choice being made.
ď‚— Note: If you assign an AS score to one strategy, then assign AS score(s) to the other. In other words, if
one strategy receives a dash, then all others must receive a dash in a given row.
Step 5
ď‚— Compute the Total Attractiveness Scores.
Step 6
ď‚— Compute the Sum Total Attractiveness Score.
39. Limitations & Advantages of
QSPM
Limitations of QSPM
ď‚— A limitation of the QSPM is that it can be only as good as the
prerequisite information and matching analyses upon which it is based.
ď‚— Another limitation is that it requires good judgment in assigning
attractiveness scores.
ď‚— Also, the sum total attractiveness scores can be really close such that a
final decision is not clear.
ď‚— Like all analytical tools however, the QSPM should not dictate decisions
but rather should be developed as input into the owner’s final decision.
Advantages of QSPM
ď‚— A QSPM provides a framework to prioritize the strategies,
ď‚— It can be used for comparing strategies at any level such as corporate,
business and functional.
ď‚— The other positive feature of QSPM that it integrate external and internal
factors into decision making process.
ď‚— A QSPM can be developed for small and large scale profit and non-profit
organizations.
42. QSPM
Key Internal Factors
Weight
Start
producing
Wintel
compatible
Expand
production into
Asia
Strengths AS TAS AS TAS
iTunes Music Store is a good source of
revenue, especially with the iPod and the
availability on Windows platform.
0.15 1.00 0.15 3.00 0.45
Apple’s niche audience provides the
company with some insulation from the
direct price competition.
0.20 4.00 0.80 3.00 0.60
Good brand loyalty. 0.20 4.00 0.80 3.00 0.60
Web technology can be used to improve
product awareness and sales.
0.15 4.00 0.60 3.00 0.45
Weaknesses
Weak relationship with Intel and Microsoft. 0.15 4.00 0.60 1.00 0.15
Weak presence in markets other than
education and publishing.
0.15 2.00 0.30 4.00 0.60
SUBTOTAL 1.00 3.25 2.85
Apple 2005- QSPM
43. Key External Factors
Weight
Start producing
Wintel
Expand production
into Asia
Opportunities AS TAS AS TAS
Increase in worms and virus on PCs. 0.15 2 .30 3 .45
Downloadable music and MP3 players are highly
marketable.
0.06 1.00 0.12 4.00 0.48
Large population (Gen X & Y) which are extremely
individualistic and name brand conscious.
0.15 1.00 0.10 4.00 0.40
Increase in sales of laptops by 20 percent. 0.08 1.00 0.08 4.00 0.32
Creating more ties with Microsoft products. 0.10 4.00 0.12 2.00 0.08
Threats
Intel’s future Pentium release. 0.10 1.00 0.10 3.00 0.30
Dell does not invent but provides computers at a
more cost effective rate for customers.
0.06 1.00 0.06 3.00 0.18
Companies not seeing Apple as compatible with their
software.
0.15 1.00 0.05 3.00 0.15
SUBTOTAL 1.00 0.93 2.36
SUM TOTALATTRACTIVENESS SCORE 4.18 5.21
QSPM
44. Hybrid QSPM (Suggested by Prof. Delawar)
ď‚— It is a hybrid matrix that is used to evaluate
alternative set of strategies.
ď‚— It is hybrid matrix between SFAS & QSPM.
ď‚— The whole internal & external factors driven
from SFAS as they are with their weights out
of 1,00, instead of EFAS (out of 1,00 ) & IFAS
(out of 1,00 ) that result in total weight of
2,00.
ď‚— Impact (1-5) is used instead of attractiveness
score (1-4) as the impact is more
comprehensive than the attractiveness score.
ď‚— Weighted average is used instead of total
attractiveness score.
45. Factors Strategy 1 Strategy 2
External Factors W I WA I WA
O1 0.15
O3 0.20
T2 0.20
T6 0.15
Internal Factors
S1 0.15
W5 0.15
SUBTOTAL 1.00 3.25 2.85
Example of theHybrid QSPM