Chapter 6 Strategy Analysis & Choice PDF

Chapter 6 Strategy Analysis & Choice Strategic Management: Concepts & Cases 12th Edition Fred David Copyright © 2009 Pearson Education, Inc. Ch 6 -١ Publishing as Prentice Hall  Chapter Outline The Nature of Strategy & Choice...

Chapter 6 Strategy Analysis & Choice Strategic Management: Concepts & Cases 12th Edition Fred David Copyright © 2009 Pearson Education, Inc. Ch 6 -١ Publishing as Prentice Hall  Chapter Outline The Nature of Strategy & Choice A Comprehensive Strategy-Formulation Framework The Input Stage Copyright © 2009 Pearson Education, Inc. Ch 6 -٢ Publishing as Prentice Hall  Chapter Outline (cont’d) The Matching Stage The Decision Stage Cultural Aspects of Strategy Choice Copyright © 2009 Pearson Education, Inc. Ch 6 -٣ Publishing as Prentice Hall  Chapter Outline (cont’d) The Politics of Strategy Choice Governance Issues Copyright © 2009 Pearson Education, Inc. Ch 6 -٤ Publishing as Prentice Hall  Strategy Analysis & Choice Nature of Strategy Analysis & Choice – Establishing long-term objectives – Generating alternative strategies – Selecting strategies to pursue – Best alternative – achieve mission & objectives Copyright © 2009 Pearson Education, Inc. Ch 6 -٥ Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Ch 6 -٦ Publishing as Prentice Hall Strategy Analysis & Choice Alternative Strategies Derive From –
Vision
Mission
Objectives
External audit
Internal audit
Past successful strategies Copyright © 2009 Pearson Education, Inc. Ch 6 -٧ Publishing as Prentice Hall The Process of Generating and Selecting Strategies
1. Strategists never consider all feasible alternatives that could benefit the firm, because there are an infinite number of possible actions and an infinite number of ways to implement those actions. Therefore, a manageable set of the most attractive alternative strategies must be developed. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨ Publishing as Prentice Hall The Process of Generating and Selecting Strategies
2. Identifying and evaluating alternative strategies should involve many of the managers and employees who earlier assembled the organizational mission statement, performed the external audit, and conducted the internal audit.
3. Alternative strategies proposed by participants should be considered and discussed in a meeting or series of meetings. Copyright © 2009 Pearson Education, Inc. Ch 6 -٩ Publishing as Prentice Hall Strategy Analysis & Choice Generating Alternatives – Participation in generating alternative strategies should be as broad as possible Copyright © 2009 Pearson Education, Inc. Ch 6 -١٠ Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Ch 6 -١١ Publishing as Prentice Hall Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: Stage 3: The Matching Stage The Decision Stage Copyright © 2009 Pearson Education, Inc. Ch 6 -١٢ Publishing as Prentice Hall Strategy-Formulation Analytical Framework Internal Factor Evaluation Matrix (IFE) Stage 1: External Factor Evaluation The Input Stage Matrix (EFE) Competitive Profile Matrix (CPM) Copyright © 2009 Pearson Education, Inc. Ch 6 -١٣ Publishing as Prentice Hall Stage 1: The Input Stage Basic input information for the matching & decision stage matrices Requires strategists to quantify subjectivity early in the process Good intuitive judgment always needed Copyright © 2009 Pearson Education, Inc. Ch 6 -١٤ Publishing as Prentice Hall Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix Stage 2: BCG Matrix The Matching Stage IE Matrix Grand Strategy Matrix Copyright © 2009 Pearson Education, Inc. Ch 6 -١٥ Publishing as Prentice Hall Stage 2: The Matching Stage Match between organization’s internal resources & skills and the opportunities & risks created by its external factors Copyright © 2009 Pearson Education, Inc. Ch 6 -١٦ Publishing as Prentice Hall Stage 2: The Matching Stage SWOT Matrix Strengths Weaknesses Opportunities Threats Copyright © 2009 Pearson Education, Inc. Ch 6 -١٧ Publishing as Prentice Hall SWOT Matrix Four Types of Strategies Strengths-Opportunities (SO) Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT) Copyright © 2009 Pearson Education, Inc. Ch 6 -١٨ Publishing as Prentice Hall SO Strategies Strengths Weaknesses Use a firm’s internal strengths Opportunities to take advantage Threats SO of external Strategies opportunities SWOT Copyright © 2009 Pearson Education, Inc. Ch 6 -١٩ Publishing as Prentice Hall WO Strategies Strengths Weaknesses Improving internal weaknesses by Opportunities taking advantage Threats WO of external Strategies opportunities SWOT Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٠ Publishing as Prentice Hall ST Strategies Strengths Use a firm’s Weaknesses strengths Opportunities to avoid or Threats reduce the impact ST of external Strategies threats SWOT Copyright © 2009 Pearson Education, Inc. Ch 6 -٢١ Publishing as Prentice Hall WT Strategies Defensive tactics Strengths aimed at reducing Weaknesses internal Opportunities weaknesses & Threats avoiding WT environmental Strategies threats SWOT Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٢ Publishing as Prentice Hall SWOT Matrix Developing the SWOT List firm’s key internal Strengths List firm’s key internal Weaknesses List firm’s key external Opportunities List firm’s key external Threats Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٣ Publishing as Prentice Hall SWOT Matrix Strengths – S Weaknesses – W List Strengths List Weaknesses Opportunities – O SO Strategies WO Strategies Use strengths to take Overcoming weaknesses List Opportunities advantage of by taking advantage of opportunities opportunities Threats – T ST Strategies WT Strategies Use strengths to avoid Minimize weaknesses and List Threats threats avoid threats Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٤ Publishing as Prentice Hall 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 Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٥ Publishing as Prentice Hall Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix Stage 2: BCG Matrix The Matching Stage IE Matrix Grand Strategy Matrix Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٦ Publishing as Prentice Hall SPACE Matrix Strategic Position & Action Evaluation Matrix  This vector reveals the type of strategies recommended for the organization.  Aggressive  Conservative  Defensive  Competitive Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٧ Publishing as Prentice Hall SPACE Matrix Two Internal Dimensions Financial Strength (FS) Competitive Advantage (CA) Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٨ Publishing as Prentice Hall SPACE Matrix Two External Dimensions Environmental Stability (ES) Industry Strength (IS) Copyright © 2009 Pearson Education, Inc. Ch 6 -٢٩ Publishing as Prentice Hall  SPACE Factors Internal Strategic Position External Strategic Position Financial Strength (FS) Environmental Stability (ES) Return on investment Technological changes Leverage (borrow) Rate of inflation Liquidity Demand variability Working capital Price range of competing products Cash flow Barriers to entry Inventory turnover Competitive pressure Earnings per share Price elasticity of demand Price earnings ratio Ease of exit from market Risk involved in business Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٠ Publishing as Prentice Hall  SPACE Factors Internal Strategic Position External Strategic Position Competitive Advantage (CA) Industry Strength (IS) Market share Growth potential Product quality Profit potential Product life cycle Financial stability Customer loyalty Technological know-how Competition’s capacity utilization Resource utilization Technological know-how Ease of entry into market Control over suppliers & distributors Productivity, capacity utilization Copyright © 2009 Pearson Education, Inc. Ch 6 -٣١ Publishing as Prentice Hall Steps to Developing a SPACE Matrix 1. Select a set of variables to define FS, CA, ES, and IS. 2. Assign a numerical value: 1. From +1 to +6 to each FS & IS dimension 2. From -1 to -6 to each ES & CA dimension 3. Compute an average score for each FS, CA, ES, and IS. Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٢ Publishing as Prentice Hall Steps to Developing a SPACE Matrix 4. Plot the average score on the appropriate axis. 5. Add the two scores on the x-axis and plot the point. Add the two scores on the y-axis and plot the point. Plot the intersection of the new xy point. 6. Draw a directional vector from the origin through the new intersection point. Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٣ Publishing as Prentice Hall Example: the rate depends on evaluating the situation
FS: low capital ratio (1), return on assets (4), cash flow (4): average= 9\3=3
IS: freedom of product movement (4), high competition (2). Average = 6\2=3
ES: high inflation rate (-5), depression (-5) political instability (-2) = -12\3= -4
CA: growing market share (-2), product quality (-2) large customer base (-2)= -6\3=-2
Directional vector: x-axis: -2+3= +1
Y-axis: -4+3= -1 Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٤ Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٥ Publishing as Prentice Hall Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix Stage 2: BCG Matrix The Matching Stage IE Matrix Grand Strategy Matrix Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٦ Publishing as Prentice Hall BCG Matrix Boston Consulting Group Matrix Enhances multidivisional firm in formulating strategies Autonomous divisions = business portfolio Divisions may compete in different industries Focus on market-share position & industry growth rate Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٧ Publishing as Prentice Hall BCG Matrix Relative Market Share Position Ratio of a division’s own market share in an industry to the market share held by the largest rival firm in that industry Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٨ Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Ch 6 -٣٩ Publishing as Prentice Hall Example about BCG Companies Marker share in 2009 A 20% B 10% C 15% Relative market share to B 10\20=.5 Industry growth rate measured by 15%+ growth in sale of leading companies Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٠ Publishing as Prentice Hall BCG Matrix Question Marks Low relative market share, competes in high- growth industry Cash needs are high Case generation is low Decision to strengthen (intensive strategies) or divest Copyright © 2009 Pearson Education, Inc. Ch 6 -٤١ Publishing as Prentice Hall BCG Matrix
The move in a clockwise motion.
E.g. dog become cash cows.
Size of the circle represents the size of sales compared to other divisions in the company.
The pie slices within the circles represent the percent of corporate profits contributed by each division. Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٢ Publishing as Prentice Hall 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 Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٣ Publishing as Prentice Hall 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 Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٤ Publishing as Prentice Hall BCG Matrix Dogs Low relative market share, competes in slow or no market growth Weak internal & external position Liquidation, divestiture, retrenchment Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٥ Publishing as Prentice Hall Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix Stage 2: BCG Matrix The Matching Stage IE Matrix Grand Strategy Matrix Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٦ Publishing as Prentice Hall The Internal-External Matrix
Positions an organization’s various divisions in a nine-cell display
Similar to BCG Matrix except the IE Matrix:  Axes are different  Requires more information about the divisions  Strategic implications of each matrix are different Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٧ Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٨ Publishing as Prentice Hall 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 Copyright © 2009 Pearson Education, Inc. Ch 6 -٤٩ Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٠ Publishing as Prentice Hall Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix Stage 2: BCG Matrix The Matching Stage IE Matrix Grand Strategy Matrix Copyright © 2009 Pearson Education, Inc. Ch 6 -٥١ Publishing as Prentice Hall Grand Strategy Matrix  Tool for formulating alternative strategies  Based on two dimensions  Competitive position  Market growth Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٢ Publishing as Prentice Hall  RAPID MARKET GROWTH Quadrant II Quadrant I 1. Market development 1. Market development 2. Market penetration 2. Market penetration 3. Product development 3. Product development 4. Horizontal integration 4. Forward integration 5. Divestiture 5. Backward integration 6. Liquidation 6. Horizontal integration WEAK 7. Concentric diversification STRONG COMPETITIVE COMPETITIVE POSITION Quadrant III Quadrant IV POSITION 1. Retrenchment 1. Concentric diversification 2. Concentric diversification 2. Horizontal diversification 3. Horizontal diversification 3. Conglomerate 4. Conglomerate diversification diversification 4. Joint ventures 5. Liquidation SLOW MARKET GROWTH Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٣ Publishing as Prentice Hall Grand Strategy Matrix Quadrant I Excellent strategic position Concentration on current markets/products Take risks aggressively when necessary Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٤ Publishing as Prentice Hall Grand Strategy Matrix Quadrant II Evaluate present approach How to improve competitiveness Rapid market growth requires intensive strategy Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٥ Publishing as Prentice Hall Grand Strategy Matrix Quadrant III Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost & asset reduction (retrenchment) Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٦ Publishing as Prentice Hall Grand Strategy Matrix Quadrant IV Strong competitive position Slow-growth industry Diversification to more promising growth areas Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٧ Publishing as Prentice Hall Strategy-Formulation Analytical Framework Quantitative Strategic Stage 3: The Decision Stage Planning Matrix (QSPM) Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٨ Publishing as Prentice Hall QSPM Quantitative Strategic Planning Matrix Technique designed to determine the relative attractiveness of feasible alternative actions Copyright © 2009 Pearson Education, Inc. Ch 6 -٥٩ Publishing as Prentice Hall  QSPM Strategic Alternatives Key External Factors Weight Strategy 1 Strategy 2 Strategy 3 Economy Political/Legal/Governmental Social/Cultural/Demographic/ Environmental Technological Competitive Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٠ Publishing as Prentice Hall Steps to Develop a QSPM 1. Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column. 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. Copyright © 2009 Pearson Education, Inc. Ch 6 -٦١ Publishing as Prentice Hall Steps to Develop a QSPM 4. Determine the Attractiveness Scores. 5. Compare the Total Attractiveness Scores. 6. Compute the Sum Total Attractiveness Score. Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٢ Publishing as Prentice Hall QSPM Limitations Requires intuitive judgments & educated assumptions Only as good as the prerequisite inputs Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٣ Publishing as Prentice Hall QSPM Advantages Sets of strategies considered simultaneously or sequentially Integration of pertinent external & internal factors in the decision-making process Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٤ Publishing as Prentice Hall Cultural Aspects of Strategy Choice Organization Culture Successful strategies depend on the degree of consistency with the firm’s culture Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٥ Publishing as Prentice Hall Cultural Aspects of Strategy Choice
It is beneficial to view strategic management from a cultural perspective because success often rests on the degree of support that strategies receive from a firm’s culture. Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٦ Publishing as Prentice Hall Cultural Aspects of Strategy Choice
If a firm’s strategies are supported by cultural products such as values, beliefs, rites, rituals, ceremonies, stories, symbols, language, heroes, and heroines, then managers often can implement changes swiftly and easily.
Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort. Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٧ Publishing as Prentice Hall Cultural Aspects of Strategy Choice
In the absence of objective analyses, strategy decisions too often are based on the politics of the moment. With development of improved strategy- formulation tools, political factors become less important in making strategic decisions. Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٨ Publishing as Prentice Hall Politics of Strategy Choice Politics in Organizations Management hierarchy Career aspirations Allocation of scarce resources Copyright © 2009 Pearson Education, Inc. Ch 6 -٦٩ Publishing as Prentice Hall Politics of Strategy Choice Political Tactics for Strategists Equifinality: give flexibility to use different techniques. Satisfying: achieving satisfactory results with acceptable strategies. Generalization: shifting focus from specific to general ones. Higher-order issues: postponed short-term in favor of long term. E.g., focus on survival and give concession to union on wage increase. Political access on important issues Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٠ Publishing as Prentice Hall Governance Issues Board of Directors Roles & Responsibilities Control & oversight over management Adherence to legal prescriptions Consideration of stakeholder interests Advancement of stockholder rights Copyright © 2009 Pearson Education, Inc. Ch 6 -٧١ Publishing as Prentice Hall Global Perspective Corporate Tax Rates Worldwide – Europe is Lowest
Lowest corporate tax rates reside in Europe and European countries
Average tax rate in EU countries is 26%
Besides tax rates, large markets and affluent markets attract new businesses
Taxes can be used to reward or penalize companies for locating locally or moving overseas Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٢ Publishing as Prentice Hall Corporate Governance Issues BusinessWeek’s “Principles of Good Governance” 1. No more than 2 directors are current or former company executives 2. No directors do business with the company 3. Audit, compensation, and nominating committees made up of outside directors 4. Each director owns a large equity stake in the company 5. At least one outside director with extensive experience 6. Fully employed directors sit on no more than 4 boards, retirees on no more than 7 7. Each director attends at least 75% of all meetings Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٣ Publishing as Prentice Hall Corporate Governance Issues Business Week’s “principles of good governance” 8. Board meets regularly without management present 9. Audit committee meets at least four times a year 10. Board is frugal on executive pay, diligent in CEO succession, and prompt to act when trouble arises 11. CEO is not also the chairperson of the board 12. Shareholders have considerable power and information to choose & replace directors 13. Stock options are considered a corporate expense 14. No interlocking directorships Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٤ Publishing as Prentice Hall For Review (Chapter 6) Key Terms & Concepts Aggressive Quadrant Business Portfolio Attractiveness Scores Cash Cows (AS) Competitive Advantage Board of Directors (CA) Boston Consulting Competitive Quadrant Group (BCG) Matrix Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٥ Publishing as Prentice Hall For Review (Chapter 6) Key Terms & Concepts Conservative Quadrant Dogs Environmental Stability Culture (ES) Financial Strength Defensive Quadrant (FS) Directional Vector Governance Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٦ Publishing as Prentice Hall For Review (Chapter 6) Key Terms & Concepts Internal-External (IE) Grand Strategy Matrix Matrix Halo Error Matching Industry Strength Matching Stage (IS) Quantitative Strategic Input Stage Planning Matrix (QSPM) Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٧ Publishing as Prentice Hall For Review (Chapter 6) Key Terms & Concepts Question Marks Stars Relative Market Share Strategic Position & Action Position Evaluation (SPACE) Sum Total Attractiveness SO Strategies Score (STAS) ST Strategies Sustainability Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٨ Publishing as Prentice Hall For Review (Chapter 6) Key Terms & Concepts Strengths, Weaknesses, WO Strategies Opportunities, Threats (SWOT) Total Attractiveness WT Strategies Scores (TAS) Copyright © 2009 Pearson Education, Inc. Ch 6 -٧٩ Publishing as Prentice Hall Review
How would application of the strategy- formulation framework differ from a small to a large organization?
The strategy-formulation framework is conceptually identical for both small and large organizations. However, in large organizations, there are more variables to analyze and forecast. This makes the strategy-formulation process more complex. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٠ Publishing as Prentice Hall Review
Given the information in the table below, develop a BCG Matrix and an IE Matrix.
Divisions 1 2 3
Profits $10 $15 $25
Sales $100 $50 $100
Relative Market Share 0.2 0.5 0.8
Industry Growth Rate +.20 +.10 -.10
IFE Total Weighted Success 1.6 3.1 2.2
EFE Total Weighted Success 2.5 1.8 3.3 Copyright © 2009 Pearson Education, Inc. Ch 6 -٨١ Publishing as Prentice Hall Review
Explain the steps involved in developing a QSPM.
Answer: There are six basic steps involved in applying QSPM:
Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM.
Assign weights to each key external and internal factor.
Examine the Stage 2 matrices and identify alternative strategies that the organization should consider implementing.
Determine the AS.
Compute the total AS.
Compute the sum Total AS Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٢ Publishing as Prentice Hall Review
What do you think is the appropriate role of a board of directors in strategic management? Why?
Answer: Board members should review strategy formulation, implementation, and evaluation reports. As described in the chapter, board members are, more and more, being held personally liable for failed strategies in organizations. Board members should provide input, advice, suggestions, and comments about strategic-management activities. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٣ Publishing as Prentice Hall Review
Explain why cultural factors should be an important consideration in analyzing and choosing among alternative strategies.
Answer: Cultural factors are an integral part of everyday life in organizations. An organization’s unique culture represents the heart of work. Thus, in choosing among alternative strategies for an organization, consideration should be given to the different levels of support that proposed strategies would receive from existing cultural products. Consideration should also be given to whether cultural changes could be achieved readily. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٤ Publishing as Prentice Hall Review
How are the SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and Grand Strategy Matrix similar? How are they different?
The TOWS Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and Grand Strategy Matrix are similar in that all are matching tools in stage two of the strategy-formulation framework. These analytical tools differ, in that they focus on different variables. Also, the BCG and IE Matrices generally apply only to a multidivisional firm, whereas the TOWS, SPACE, and Grand Strategy Matrices are applicable to all organizations. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٥ Publishing as Prentice Hall Review
List 4 limitations of a BCG Matrix.
Viewing every business as one of four types is an oversimplification. Some businesses are not easily classified. The matrix does not reflect whether or not various divisions are growing over time, because the matrix has no temporal qualities. Other variables besides relative market share position and industry growth rate in sales, such as size of the market and competitive advantages are important in making strategic decisions. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٦ Publishing as Prentice Hall Review
Why should one avoid putting double 4’s in a row in preparing a QSPM?
The numbers refer to the relative attractiveness of one strategy over others considering a particular factor. A 4 means that the strategy is highly attractive. Because it is a measure of relative attractiveness, each strategy will receive a different score. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٧ Publishing as Prentice Hall Review
If a firm has the leading market share in its industry, where on the BCG Matrix would the circle lie?
Firms with high relative market share are plotted as either Stars (Quadrant II) or Cash Cows (Quadrant III) on the BCG Matrix. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٨ Publishing as Prentice Hall Review
Why do you feel the SWOT Matrix is the most widely used of all strategy matrices?
The SWOT Matrix is one of five techniques that can be used in the matching stage of the strategy-formulation framework. While the other techniques also are useful in the matching stage, the SWOT is easy to apply. Copyright © 2009 Pearson Education, Inc. Ch 6 -٨٩ Publishing as Prentice Hall