Strategy

Analysis and
Choice
A Comprehensive Strategic-
Management Model
 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
 Strategy Analysis & Choice

Alternative Strategies Derive From:

❖ Vision
❖ Mission
❖ Objectives
❖ External audit
❖ Internal audit
❖ Past successful strategies

Ch 7 -4 Copyright © 2011 Pearson Education

 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 -5 Copyright © 2011 Pearson Education

The Strategy-Formulation
Analytical Framework
 Comprehensive Strategy-Formulation Framework

Stage 1:
The Input Stage

Stage 2:
The Matching Stage

Stage 3:
The Decision Stage

Ch 7 -7 Copyright © 2011 Pearson Education

 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)
 Strategy-Formulation Analytical Framework

Internal Factor Evaluation

Matrix (IFE)

Stage 1: External Factor Evaluation

The Input Stage Matrix (EFE)

Competitive Profile Matrix

(CPM)

Ch 7 -9 Copyright © 2011 Pearson Education

 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
 Strategy-Formulation Analytical Framework

SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

Ch 7 -11 Copyright © 2011 Pearson Education

Matching Key External and Internal Factors
to Formulate Alternative Strategies
 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
 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
 SO Strategies

Strengths
Use a firm’s
Weaknesses
internal strengths
Opportunities
to take advantage
Threats
SO of external
Strategies opportunities
SWOT

Ch 7 -15 Copyright © 2011 Pearson Education

 WO Strategies

Strengths
Improving internal
Weaknesses
weaknesses by
Opportunities
taking advantage
Threats WO of external
Strategies opportunities
SWOT

Ch 7 -16 Copyright © 2011 Pearson Education

 ST Strategies

Strengths Use a firm’s

Weaknesses strengths
Opportunities to avoid or
Threats reduce the impact
ST
of external
Strategies
SWOT threats

Ch 7 -17 Copyright © 2011 Pearson Education

 WT Strategies

Defensive tactics
Strengths aimed at reducing
Weaknesses internal
Opportunities weaknesses &
Threats avoiding
WT
environmental
Strategies
SWOT threats

Ch 7 -18 Copyright © 2011 Pearson Education

 SWOT Matrix

Strengths – Weaknesses –
S W

List Strengths List Weaknesses

Opportunities – SO WO Strategies
O Strategies
Overcoming
weaknesses by taking
Use strengths to
List Opportunities take advantage of
advantage of
opportunities
opportunities

Threats – T ST WT Strategies
Strategies
Minimize weaknesses
List Threats and avoid threats
Use strengths to
Ch 7 -19 Copyright © 2011 Pearson Education avoid threats
 Proses Pengambilan Keputusan
Strategis
3a Analisis 3b
Scan Faktor
Lingk. Eksternal
Eksternal . Peluang
. Ancaman
1a 1b 5b 6 7 8
Review
2 5a Terapkan
Evaluasi Misi & Pilihdan Evaluasi
Review Strategi:
Evaluasi misi, tujuan, Tujuan + Rekomd.
Performa strategi &
Corporate SWOT Evaluasi Alternatif
Program dan
Governance Budget Kontrol
Kebijakan Alternatif Terbaik
Prosedur
Strategi

4a Analisis 4b
Scan Faktor
Lingk. Internal :
Internal . Kekuatan
. Kelemahan

Penerapan
Formulasi Strategi Strategi
 Ringkasan Analisis Faktor Strategis
Internal (IFAS)
Faktor-faktor Strategis Eksternal Bobot Rating Skor Yang Keterangan
Dibobotkan
Kekuatan :
1. Budaya Maytag 1.5 5 0,75 Kualitas = kunci sukses
2. Manajemen puncak yang 0,05 4 0,20 Mengerti tentang
berpengalaman perlengkapan
3. Integrasi Vertikal 0,10 4 0,40 Pabrik2 yang berdedikasi
4. Orientasi internasional dari Hoover 0,15 3 0,15 Nama “Hoover” pada produk
pembersih
5. Hubungan Karyawan 0,15 3 0,45 Baik, tapi mulai memburuk
Kelemahan :
1. R&D yang berorientasi pada proses 0,05 2 0,10 Lambatnya produk baru
2. Saluran Distribusi 0,05 2 0,10 Super store menggantikan
dealer kecil
3. Potensi Finansial 0,15 2 0,30 Tingginya hutang
4. Posisi secara global 0,20 2 0,40 Hoover lemah diluar UK &
Auatralia
5. Fasilitas pabrik 0,05 4 0,20 Sedang berinvestasi

Total 1 3,05
 Ringkasan Analisis Faktor Strategis
Eksternal (EFAS)
Faktor-faktor Strategis Eksternal Bobot Rating Skor Yang Keterangan
Dibobotkan
Peluang-Peluang :
1. Integrasi ekonomi masy Eropa 0,20 4 0,80 Akuisisi Hoover
2. Peralatan2 berkualitas 0,10 5 0,50 Kualitas Maytag

3. Perkembangan ekonomi Asia 0,5 1 0,05 Kehadiran Maytag yang

lemah
4. Terbukanya Eropa Timur 0,5 2 0,10 Butuh waktu
5. Kecenderungan “Super Stores” 0,1 2 0,02 Maytag lemah pada saluran ini
Ancaman :
1. Peningkatan peraturan2 pemerintah 0,1 4 0,04 Posisi bagus
2. Kekuatan persaingan di AS 0,1 4 0,04 Posisi bagus
3. Kekuatan merek lain secara global 0,15 3 0,45 Hoover lemah secara global
4. Perkembangan produk baru 0,5 1 0,05 Dipertanyakan
5. Perusahaan2 peralatan Jepang 0,10 2 0,20 Hanya orang Asia di Australia

Total 1 3,15
 Strategic Factors Analysis Summary
(SFAS)
Faktor-faktor Strategis Kunci Bobot Rating Skor Yang Durasi, Keterangan
Dibobotkan

1. Budaya Kualitas Maytag (S) 0,20 4 0,80 Pa, Kunci Sukses

2. Orientasi internasional dari Hoover 0,10 5 0,50 M, Nama yang dikenal
(S)
3. Posisi secara global (W) 0,05 1 0,05 Pa, Di AS, UK, Australia
4. Integrasi ekonomi masy Eropa (O) 0,05 2 0,10 Pa, Akuisisi Hoover
5. Kecenderungan ke arah “Super 0,01 2 0,02 Pe, Maytag lemah pada
Stores” (O + T) saluran ini

6. Posisi Financial (W) 0,01 4 0,04 M, Hutang tinggi

7. Demografi yang mendukung 0,01 4 0,04 M, Kualitas/ Posisi bagus
kualitas (O)
8. Whirlpool dan Electrolux (T) 0,15 3 0,45 Pe, Dominasi Industri
9. Perusahaan2 peralatan Jepang (T) 0,05 1 0,05 Pa, Kehadiran Asia

Total 1 3,15
 Kekuatan Kelemahan
Matrik SWOT : ◼ Budaya Maytag ◼ R&D berorientasi pada proses
Maytag ◼ Manajemen Puncak yang ◼ Saluran Distribusi
berpengalaman ◼ Posisi secara global
◼ Integrasi Vertikal ◼ Fasilitas manufaktur
◼ Hubungan karyawan
◼ Integrasi international dari
Hoover
Peluang Strategi SO : Strategi WO :
◼ Integrasi Ekonomi Komunitas ◼ Menggunakan saluran ◼ Memperluas kehadiran Hoover
orang Eropa distribusi Hoover di seluruh di eropa dengan meningkatkan
◼ Demografi yang mendukung dunia untuk menjual kualitas dan mengurangi biaya
peralatan berkualitas ◼ Mencari mitra usaha pemanufakturan dan distribusi
◼ Perkembangan ekonomi Asia bersama di eropa Timur dan ◼ Menekankan pada saluran

◼ Kecenderungan Superstores
Asia superstores untuk seluruh merek
Mayteg
Ancaman Strategi ST : Strategi WT :
◼ Peraturan pemerintah yang ◼ Mengambil bisnis Raytheon ◼ Jual habis Divisi Dixie-Narco
semakin ketat dan banyak untuk meningkatkan pangsa untuk mengurangi utang
◼ Persaingan ketat di AS pasar di AS ◼ Fakus pada pengurangan biaya
◼ Whirlpool dan Elektrolux kuat ◼ Bergabung dengan untuk mengurangi BEP
secara global perusahaan Jepang ◼ Jual habis Raytheon atau
◼ Kemajuan prosuk baru ◼ Jual habis semua merk selain perusahaan Jepang
◼ Perusahaan peralatan Jepang
Maytag dan melindungi ceruk
pasar Maytag di AS
A SWOT Matrix for a Retail
Computer Store
A SWOT Matrix for a Retail
Computer Store
 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 -27 Copyright © 2011 Pearson Education
 Strategy-Formulation Analytical Framework

SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

Ch 7 -28 Copyright © 2011 Pearson Education

 SPACE Matrix
Strategic Position & Action Evaluation Matrix

4-quadrants indicate whether the most appropriate

strategy is:
• Aggressive
• Conservative
• Defensive
• Competitive

Ch 7 -29 Copyright © 2011 Pearson Education

The SPACE Matrix
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
Factors That Make Up the
SPACE Matrix Axes
Factors That Make Up the
SPACE Matrix Axes
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)
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
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
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
Example Strategy Profiles
Example Strategy Profiles
 Strategy-Formulation Analytical Framework

SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

Ch 7 -40 Copyright © 2011 Pearson Education

 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
The BCG Matrix
 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
 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 -44 Copyright © 2011 Pearson Education

 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 -45 Copyright © 2011 Pearson Education

 BCG Matrix
Dogs

• Low relative market share, competes in slow or

no market growth
- Weak internal & external position

• Liquidation, divestiture, retrenchment

Ch 7 -46 Copyright © 2011 Pearson Education

 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
Strategy-Formulation Analytical Framework

SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

Ch 7 -48 Copyright © 2011 Pearson Education

 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 -49 Copyright © 2011 Pearson Education

The Internal-External (IE) Matrix
 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 -51 Copyright © 2011 Pearson Education

The IE Matrix
Ch 7 -53 Copyright © 2011 Pearson Education
Strategy-Formulation Analytical Framework

SWOT Matrix

SPACE Matrix

Stage 2: BCG Matrix

The Matching Stage

IE Matrix

Grand Strategy Matrix

Ch 7 -54 Copyright © 2011 Pearson Education

 The Grand Strategy Matrix

❖ Grand Strategy Matrix

 based on two evaluative dimensions:
• competitive position and
• market (industry) growth
The Grand Strategy Matrix
 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
 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
 Strategy-Formulation Analytical Framework

Quantitative Strategic
Stage 3:
Planning Matrix
The Decision Stage (QSPM)

Ch 7 -59 Copyright © 2011 Pearson Education

 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
 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
The Quantitative Strategic
Planning Matrix (QSPM)
 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
 Steps in a QSPM (cont.)

4. Determine the Attractiveness Scores (AS)

5. Compute the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness
Score
 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
 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
A QSPM for a Retail
Computer Store
A QSPM for a Retail
Computer Store
 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 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
 Tactics to Aid Strategists

Equifinality

Satisfying

Generalization

Focus on Higher-Order Issues

Provide Political Access on Important Issues