report on strategic management, august 13, 2011 by flordeliza navidad

8/6/2019 Report on Strategic Management, August 13, 2011 by Flordeliza Navidad

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Nature of Strategy Analysisand

Comprehensive StrategicFormulation

Flordeliza C. Navidad

Reporter

Strategy

Strategic analysis

The Process of Strategic

Analysis

1. PEST analysis -a technique for understanding the “ environment’ inwhich a business operates.

2. ScenarioPlanning

- A technique that builds various plausible views of possible futures for a business.

3. Five ForcesAnalysis

- a technique for identifying the forces which affectthe level of competition in an industry.

4. MarketSegmentation

- a technique which seeks to identify the similaritiesand differences between groups of customers or

users.5. Directional Policy

Matrix_ a technique which summarizes the competitive

strength of a business operations in specific markets.

6. Critical Success

Factor analysis

- A technique to identify those areas in which a

business must out perform the competition in order tosucceed.

7. SWOT Analysis - A useful summary technique for summarizing thekey issues arising from an assessment of abusiness” “internal” position and ‘ external environ’lposition.

Comprehensive Strategy-FormulationFramework

Stage 1:The Input Stage

Stage 2:

The Matching Stage

Stage 3:

The Decision Stage

Strategy-Formulation AnalyticalFramework

Competitive Profile Matrix(CPM)

Internal Factor EvaluationMatrix (IFE)

Stage 1:The Input Stage

External Factor EvaluationMatrix (EFE)

Note: EFE and CPM form external and IFE from internal (assessment)

Stage 1: The Input Stage

Basic input information for the matching &decision stage matrices

Requires strategists to quantify subjectivityearly in the process

Good intuitive judgment always needed

Strategy-Formulation AnalyticalFramework SWOT Matrix

BCG Matrix

Grand Strategy Matrix

Stage 2:The Matching Stage

Stage 2: The Matching Stage

Match between organization’s internal resources &skills and the opportunities & risks created by itsexternal factors

E.g. internal: strong R and D function

External changing demographics (populationgetting older)

Strategy: Develop new products for older adults(related to long term objectives financial or

strategic )

Strengths: Weaknesses:

1. R and D almost complete2. Basis for strong management team3. Key first major customer acquired

4. Initial product can evolve into rangeof offerings5. Located near a major centre of

excellence6. Very focused management/staff 7. Well-rounded and managed

business

1. Over dependent on borrowings -Insufficient cash resources

2. Board of Directors is too narrow

3. Lack of awareness amongstprospective customers4. Need to relocate to larger premises5. Absence of strong sales/marketing

expertise6. Overdependence on few key staff 7. Emerging new technologies may

move market in new directions

Threats: Opportunities:

1. Major player may enter targetedmarket segment

2. New technology may makeproducts obsolescent

3. Economic slowdown could reducedemand

4. Euro/Yen may move against $5. Market may become price sensitive6. Market segment's growth could

attract major competition

1. Market segment is poised for rapidgrowth

2. Export markets offer great potential3. Distribution channels seeking new

products4. Scope to diversify into related

market segments

Develop a newemployee benefitspackage

=Strong unionactivity (threat)

Poor employeemorale(weakness)

Develop newproducts for older

adults

Decreasingnumbers of youngadults (threat)

+Strong R&D(strength)

Pursue horizontal

integration by buyingcompetitor's facilities

Exit of two major foreign competitors

from the industry(opportunity)

Insufficient

capacity(weakness)

AcquireCellfone, Inc.

20% annual

growth in the cellphone industry(opportunity)

+Excess workingcapacity (strength)

Key Internal Factor Key External Factor Resultant Strategy

Matching Key Factors to Formulate Alternative Strategies

Key Strategies

1. Accelerate product launches by strengthening R and Dteam

2. Extend links with key technology centres

3. Raise additional venture capital

4. Expand senior management team in sales/marketing5. Recruit non-executive directors

6. Strengthen human resources function and introduceshare options for staff

7. Appoint advisers for intellectual property and finance

8. Seek new market segments/applications for products

Limitations with SWOT Matrix

• Does not show how to achieve acompetitive advantage

• Provides a static assessment in time

• May lead the firm to over emphasize asingle internal or external factor informulating strategies

BCG Matrix

Boston Consulting Group Matrix

Enhances multi-divisional firm informulating strategies

Autonomous divisions = business portfolio

Divisions may compete in differentindustries

Focus on market-share position & industrygrowth rate

BCG Matrix

Relative Market Share Position

Ratio of a division’s own marketshare in an industry to the marketshare held by the largest rival firmin that industry

BCG Matrix

DogsIV

Cash CowsIII

Question Marks

Relative Market Share PositionHigh

Medium

Industry

High+20

Low-20

Medium

BCG Matrix

Question Marks

Low relative market share – compete inhigh-growth industry

Cash needs are high

Case generation is low

Decision to strengthen (intensive strategies)or divest

BCG Matrix

High relative market share and high growthrate

Best long-run opportunities for growth &profitability

Substantial investment to maintain or strengthen dominant position

Integration strategies, intensive strategies, jointventures

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

BCG Matrix

Low relative market share & compete in

slow or no market growthWeak internal & external position

Liquidation, divestiture, retrenchment

Tool for formulating alternative strategies

Based on two dimensions

Competitive position

Market growth

Quadrant IV

1. Concentric diversification

2. Horizontal diversification

3. Conglomeratediversification

4. Joint ventures

Quadrant III

1. Retrenchment

3. Horizontal diversification

4. Conglomerate

diversification

5. Liquidation

Quadrant I

1. Market development

2. Market penetration

3. Product development

4. Forward integration

5. Backward integration

6. Horizontal integration

Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture

6. Liquidation

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAKCOMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION

Excellent strategic position

Concentration on current markets/products

Take risks aggressively when necessary

Which type of strategy would you suggest?

Quadrant I

Evaluate present approachHow to improve competitiveness

Rapid market growth requires

intensive strategy

Quadrant II

Compete in slow-growthindustries

Weak competitive position

Drastic changes quickly

Cost & asset reduction

(retrenchment)

Quadrant III

Strong competitive positionSlow-growth industry

Diversification to morepromising growth areas

Quadrant IV

Strategy-Formulation AnalyticalFramework

Stage 3:

The Decision Stage

Quantitative Strategic

Planning Matrix(QSPM)

Technique designed to determine therelative attractiveness of feasible alternativeactions

Steps to Develop a QSPM

1. Make a list of the firm’s key externalopportunities/threats and internalstrengths/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 theorganization should consider implementing

4. Determine the Attractiveness Scores (A.S)5. Compare the Total Attractiveness Scores

6. Compute the Sum Total Attractiveness Score

Requires intuitive judgments & educatedassumptions

Only as good as the prerequisite inputs

Limitations

Advantages

Sets of strategies considered

simultaneously or sequentially

Integration of pertinent external & internalfactors in the decision making process

Example of a QSPM for Dell

“ Whether it’s broke or not, fix it –make it better, but the whole

company if necessary.’

Bell Saporito

Thank You

report on strategic management, august 13, 2011 by flordeliza navidad

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