Strategy formulation : functional strategy & Strategy Choice
Group 2. Chp 6.. Strategy Analysis and Choice
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Transcript of Group 2. Chp 6.. Strategy Analysis and Choice
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Group Members Farah Amjad 07
Raazia Jarral 22 Um-e-Roman 29 Maham Malik 39 Anam Attique 52
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Strategy Analysis & Choice
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• Establishing long-term objectives• Generating alternative strategies• Selecting strategies to pursue• Best alternative - achieve mission & objectives
Nature of Strategy Analysis & Choice
Strategy Analysis & Choice
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• Vision• Mission• Objectives
• External audit• Internal audit
• Past successful strategies
Strategy Analysis & Choice
Alternative Strategies Derive From
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Comprehensive Strategy-Formulation Framework
Stage 1:The Input Stage
Stage 2:The Matching Stage
Stage 3:The Decision Stage
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Strategy-Formulation Analytical Framework
Internal Factor EvaluationMatrix (IFE)
External Factor EvaluationMatrix (EFE)
Stage 1:The Input Stage
Competitive Profile Matrix(CPM)
Note: EFE and CPM form external and IFE from internal (assessment)
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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
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Strategy-Formulation Analytical Framework
SWOT Matrix
BCG Matrix
Grand Strategy Matrix
Stage 2:The Matching Stage
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Stage 2: The Matching Stage
Match between organization’s internal resources & skills and the opportunities & risks created by its external factors
E.g. internal: strong R and D function
External changing demographics (population getting older)
Strategy: Develop new products for older adults (related to long term objectives financial or strategic)
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Stage 2: The Matching Stage: SWOT MatrixFour Types of Strategies
Strengths-Opportunities (SO):Use a firm’s internal strengths to take advantage of external opportunities
Weaknesses-Opportunities (WO):Improving internal weaknesses by taking advantageof external opportunities
Strengths-Threats (ST):Use a firm’s strengths to avoid or reduce the impact of external threats.
Weaknesses-Threats (WT):Defensive tactics aimed at reducing internal weaknesses and avoiding external threats
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SWOT Matrix
Leave Blank
Strengths – S
List Strengths
Weaknesses – W
List Weaknesses
Opportunities – O
List Opportunities
SO Strategies
Use strengths to take advantage of opportunities
WO Strategies
Overcoming weaknesses by taking
advantage of opportunities
Threats – T
List Threats
ST Strategies
Use strengths to avoid threats
WT Strategies
Minimize weaknesses and avoid threats
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Key Strategies1. Accelerate product launches by strengthening R and D
team 2. Extend links with key technology centres 3. Raise additional venture capital 4. Expand senior management team in sales/marketing 5. Recruit non-executive directors 6. Strengthen human resources function and introduce
share options for staff 7. Appoint advisers for intellectual property and finance 8. Seek new market segments/applications for products
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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
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BCG Matrix
Boston Consulting Group MatrixEnhances multi-divisional firm in formulating strategies
Autonomous divisions = business portfolio
Divisions may compete in different industries
Focus on market-share position & industry growth rate
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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
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BCG MatrixRelative Market Share Position
High1.0
Medium.50
Low0.0
Indu
stry
Sal
es G
row
th R
ate
High+20
Low-20
Medium0
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BCG Matrix
Question MarksLow relative market share – compete in high-growth industry
Cash needs are high
Cash generation is low
Decision to strengthen (intensive strategies) or divest
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BCG Matrix
StarsHigh 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
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BCG Matrix
Cash CowsHigh 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 possibleProduct development, concentric diversificationIf weakens—retrenchment or divestiture
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BCG Matrix
Dogs
Low relative market share & compete in slow or no market growth
Weak internal & external position
Liquidation, divestiture, retrenchment
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Grand Strategy Matrix
Tool for formulating alternative strategies
Based on two dimensions
Competitive position
Market growth
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Quadrant IV1. Concentric diversification2. Horizontal diversification3. Conglomerate
diversification4. Joint ventures
Quadrant III1. Retrenchment2. Concentric diversification3. Horizontal diversification4. Conglomerate
diversification5. Liquidation
Quadrant I1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Concentric diversification
Quadrant II1. Market development2. Market penetration3. Product development4. Horizontal integration5. Divestiture6. Liquidation
RAPID MARKET GROWTH
SLOW MARKET GROWTH
WEAK COMPETITIVE
POSITION
STRONGCOMPETITIVE
POSITION
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Grand Strategy Matrix
Excellent strategic position
Concentration on current markets/products
Take risks aggressively when necessary
Which type of strategy would you suggest?
Quadrant I
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Grand Strategy Matrix
Evaluate present approach
How to improve competitiveness
Rapid market growth requires intensive strategy
Quadrant II
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Grand Strategy Matrix
Compete in slow-growth industries
Weak competitive position
Drastic changes quickly
Cost & asset reduction (retrenchment)
Quadrant III
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Grand Strategy Matrix
Strong competitive position
Slow-growth industry
Diversification to more promising growth areas
Quadrant IV
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Strategy-Formulation Analytical Framework
Stage 3:The Decision Stage
Quantitative StrategicPlanning Matrix
(QSPM)
Technique designed to determine the relative attractiveness of feasible alternative actions
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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
4. Determine the Attractiveness Scores (A.S)5. Compare the Total Attractiveness Scores 6. Compute the Sum Total Attractiveness Score
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QSPM : information from IFE and EFE
Key Internal FactorsManagementMarketingFinance/AccountingProduction/OperationsResearch and DevelopmentComputer Information SystemsSum total A.S.
Strategy 3Strategy 2Strategy 1WeightKey External Factors EconomyPolitical/Legal/GovernmentalSocial/Cultural/Demographic/EnvironmentalTechnologicalCompetitive
Strategic Alternatives
AS 1 to 4 and blank if factor does not effect strategy: TAS = Weight x AS
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QSPM
Requires intuitive judgments & educated assumptions
Only as good as the prerequisite inputs
Limitations
AdvantagesSets of strategies considered simultaneously or sequentially
Integration of pertinent external & internal factors in the decision making process
Example of a QSPM for Dell
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Thank You