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CHAPTER 6: STRATEGY ANALYSIS & CHOICE (Process of generating and…
CHAPTER 6: STRATEGY ANALYSIS & CHOICE
Process of generating and selecting strategies
A manageable set of most attractive alternative must be developed
Their advantage, disadvantage, trade off, cost and benefits should be determine
Identifying&evaluating alternative strategies should involve many managers and employees
Alternative strategies proposed by participants should be considered and discussed
Proposed strategies should be listed in writing
When all feasible strategies identified by participants as given & understood, the strategies should be ranked in order of attractiveness
3 strategies
Stage 1: Input stage
Summarize the basic input information needed to formulate strategies
EFE matrix, IFE matrix, CPM matix
Stage 2: Matching stage
Focus on generating feasible alternative strategies by aligning key external&internal factors
SWOT Matrix
4 types strategies
SO
use firm's internal strength to take advantage of external opportunities
WO
aim at improving internal weaknesses by taking advantage of external opportunities
ST
use firm's strength to avoid/reduce the impact of external threat
WT
defensive tactics directed at reducing internal weakness&avoiding external threats
Strategic Position and Action Evaluation (SPACE) Matrix
Four quadrant framework whether aggressive (+x,+y), conservative (-x,+y), defensive (-x,-y) or competitive (+x,-y) strategies are most appropriate for a given organization
2 internal dimension
financial position (ROI, leverage, cash flow, ITO)
competitive position (market share, product quality, product life cycle)
2 external dimension
stability position (tech changes, rate of inflation)
Industry position (growth potential, profit potential, financial stability)
BCG Matrix
4 quadrants
I. Question mark : :question:
Market development, market penetration,product development, diversification
II. Stars :star:
best long run opportunities
Vertical integration strategies, market penetration, market development, product developmer
III. Cash cows
cash>needs, should be managed to maintain postion
Product development, diversification, retrenchemnt
IV Dogs
compete in slow/no market growth industry
Defensive strategies
Related market share & Growth rate
IE matrix
based on 2 ky dimension (IFE 9x-axis) & EFE(y-axis)
3 major regions
Grow&build
Hold&maintain
Harvest&digest
Grand strategy matrix
based on 2 evaluation dimension (competitive position&market growth)
4 quadrants
Quadrant I (continued concentrated on current markets (penetration&development) & product (development) is appropriate strategy
Quadrant II (unable to compete efficiently, need to determine why firms current ineffective),(market development, market penetration, product development,etc)
Quadrant III (must make some drastic changes quickly to avoid further decline, extensive cost & asset reduction (retrenchment))
Quadrant IV (have characteristically high cash-flow levels & limited internal growth needs & often can peruse related/unrelated diversification successfully
Stage 3 Decision stage
Quantitative Strategic Planning Matrix (QSPM)
Steps
Make a list of SWOT in left column
Assign weight to each SWOT
Examine Stage 2 matrices & identify alternative strategies that organization should be implement
Determine attractiveness scores (AS)
Compute the total AS
Compute sum of total AS