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Chapter 5

Strategy Formulation:Situation Analysis and

Business Strategy

Internal Factor Analysis Summary (IFAS)

Internal Factors Weight Rating

Weighted

Score Comments

1 2 3 4 5

1.00

Strengths

Weaknesses

Total Weighted Score

Notes: 1. List strengths and weaknesses (510 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column2 based on that factors probable impact on the companys strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5(Outstanding) to 1 (Poor) in Column 3 based on the companys response to that factor. 4. Multiply each factors weight times its rating to obtain eachfactors weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the totalweighted score for the company in Column 4. This tells how well the company is responding to the strategic factors in its internal environment.Source: T. L.Wheelen and J. D. Hunger, External Strategic Factors Analysis Summary (EFAS). Copyright 1991 byWheelen and Hunger Associates.Reprinted by permission.

External Factor Analysis Summary (EFAS)

ExternalStrategic Factors Weight Rating

WeightedScore Comments

1 2 3 4 5

1.00

Opportunities

Threats

Total Weighted Score

Notes: 1. List opportunities and threats (510 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2based on that factors probable impact on the companys strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding)to 1 (Poor) in Column 3 based on the companys response to that factor. 4. Multiply each factors weight times its rating to obtain each factorsweighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weightedscore for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment.Source: T. L.Wheelen and J. D. Hunger, External Strategic Factors Analysis Summary (EFAS). Copyright 1991 byWheelen and Hunger Associates.Reprinted by permission.

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Strategic Window / Niche

Niche A need in the marketplace that is currentlyunsatisfied!

Propitious Niche An extremely favorable niche.

One that is so well suited to the firms internal and externalenvironmental that other corporations are unlikely to challenge ordislodge it!

Once filled, the niche is not worth a potential competitors time ormoney to also go after the same niche.

Strategic Window A unique market opportunity that isavailable only for a particular time.

The first firm through an strategic window can occupy a propitiousniche and discourage competition (if the firm has the requiredinternal strengths).

SO Strategies

Generate strategies herethat use strengths to takeadvantage of opportunities

ST Strategies

Generate strategies herethat use strengths toavoid threats

WO Strategies

Generate strategies herethat take advantage ofopportunities byovercoming weaknesses

WT Strategies

Generate strategies herethat minimize weaknessesand avoid threats

INTERNALFACTORS

(IFAS)EXTERNALFACTORS(EFAS)

Strengths (S)

List 5 10 internalstrengths here

Weaknesses (W)

List 5 10 internalweaknesses here

Opportunities (O)

List 5 10 externalopportunities here

Threats (T)

List 5 10 externalthreats here

TOWS Matrix

Generating Alternative Strategies

Source: Adapted from Long-Range Planning,Apr il1982, H. Weihrich, The TOWS MatrixA Toolfor Situational Analysis p. 60. Copyright1982, withkind permission from H.Weihrichand ElsevierScience Ltd. The Boulevard, Langford Lane,Kidlington OX5 1GB, UK.

Business Strategy

Focuses on improving the competitive position !

Competitive Strategy Battling against all competitorsfor advantage. (and/or)

Cooperative Strategy Working with one or morecompetitors to gain advantage against other competitors.

Just as the Corporate Strategy asks what industry(ies) the

company should be in : Business Strategy askshow the

company or its units should compete or cooperate in each industry.

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Porters Competitive Strategies

Generic Competitive Strategies:

Lower cost strategy Design, produce, market more efficiently

than competitors

Differentiation strategy

Unique and superior value in terms ofproduct quality, features, service

Porters Generic Competitive Strategies

Dimensions of Quality

Quality

Performance

Features

Reliability

Conformance

Durability

Serviceability

Aesthetics

Perceived Quality

Dimensions

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Tactics

A tactic is a specific operating plan detailing how astrategy is to be implementedin terms of when and

where it is to be put into action.

Viewed as a link between the formulation andimplementation of strategy.

Timing Tactics - When

First mover

Late mover

Market Location Tactics - Where

Offensive

Defensive

Cooperative Strategies

Strategic

Alliance

Access to markets

Achieve competitive

advantage

Obtain technology

Reduce financial risk

Reduce political risk