strat mgt analytical framework

8/18/2019 Strat Mgt Analytical Framework

1/56

Fred R. David

Prentice Hall

Ch 6-1

Strategy-Formulation Analytical Framework

Stage 1: The Input Stage

Stage 2: The Matching Stage

Stage 3: The Decision Stage


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Fred R. David

Prentice Hall

Ch 6-2

Formulation Framework

!ternal Factor "aluation

Matri! #F$

%ompetiti"e &ro'ile

Matri!

Internal Factor "aluation

Matri! #IF$

Stage 1:The Input Stage


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Fred R. David

Prentice Hall

Ch 6-3

Input Stage

• &ro"i(es )asic input in'ormation 'or the

matching an( (ecision stage matrices• *e+uires strategists to +uanti'y

su),ecti"ity early in the process

• oo( intuiti"e ,u(gment always nee(e(


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Fred R. David

Prentice Hall

Ch 6-4


S&A% Matri!

Stage 2:The Matching Stage

T./S Matri!

0% Matri!

I Matri!

ran( Strategy Matri!


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Fred R. David

Prentice Hall

Ch 6-5

Matching Stage

•Match )etween organiations internalresources an( skills an( the

opportunities an( risks create( )y its

e!ternal 'actors


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Fred R. David

Prentice Hall

Ch 6-6

Matching 4ey Factors to Formulate Alternati"e Strategies

Resultant StrategyKey External Factor Key Internal Factor

De"elop a new employee

)ene'its package5Strong union acti"ity

#threat$6

&oor employee morale

#weakness$

De"elop new pro(ucts 'or

ol(er a(ults5

Decreasing num)ers o'

young a(ults #threat$6Strong *7D #strength$

&ursue horiontal integration)y )uying competitor8s

'acilities

5!it o' two ma,or 'oreigncompetitors 'orm the

in(ustry #opportunity$

6Insu''icient capacity

#weakness$

Ac+uire %ell'one9 Inc5

2; annual growth in the

cell phone in(ustry

#opportunity$

6!cess working capacity

#strength$


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Fred R. David

Prentice Hall

Ch 6-7


S&A% Matri!


TOWS Matrix

0% Matri!

I Matri!



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Fred R. David

Prentice Hall

Ch 6-8

Matching Stage

T./S Matri!

–Threats

–.pportunities

–Strengths

–/eaknesses


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Fred R. David

Prentice Hall

Ch 6-9

T./S Matri!

De"elop 'our types o' strategies

–Strengths-.pportunities #S.$

–/eaknesses-.pportunities #/.$

–Strengths-Threats #ST$

–/eaknesses-Threats #/T$


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Fred R. David

Prentice Hall

Ch 6-10

SO Strategies

SO

Strategies


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Fred R. David

Prentice Hall

Ch 6-11

WO Strategies

WO

Strategies

Impro"ing

internalweaknesses )y

taking

a("antage o'

e!ternalopportunities

Threats.pportunities

/eaknesses

Strengths

#T./S$


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Fred R. David

Prentice Hall

Ch 6-12

ST Strategies

ST

Strategies


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Fred R. David

Prentice Hall

Ch 6-13

WT Strategies

WT

Strategies

De'ensi"e

tactics aime( atre(ucing internal

weaknesses

an( a"oi(ing

en"ironmentalthreats

Threats.pportunities

/eaknesses

Strengths

#T./S$


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Fred R. David

Prentice Hall

Ch 6-14

T./S Matri!

Steps in (e"eloping the T./S Matri!

1 =ist the 'irms key e!ternal opportunities2 =ist the 'irms key e!ternal threats

3 =ist the 'irms key internal strengths

> =ist the 'irms key internal weaknesses


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Fred R. David

Prentice Hall

Ch 6-15

T./S Matri!

De"eloping the T./S Matri!

? Match internal strengths with e!ternal opportunitiesan( recor( the resultant S. Strategies

@ Match internal weaknesses with e!ternalopportunities an( recor( the resultant /. Strategies

Match internal strengths with e!ternal threats an(recor( the resultant ST Strategies

B Match internal weaknesses with e!ternal threats an(recor( the resultant /T Strategies


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Fred R. David

Prentice Hall

Ch 6-16

T./S Matri!

WT Strategies

Minimize weaknesses

and avoid threats

ST Strategies

Use strengths to avoid

threats

Threats-T

List Threats

WO Strategies

Overcome weaknesses

by taking advantage of

opportunities

SO Strategies

Use strengths to take

advantage of opportunities

Opportunities-O

List Opportunities

Weaknesses-W

List Weaknesses

Strengths-S

List Strengths

Leave lank


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Fred R. David

Prentice Hall

Ch 6-17


S!"#E Matrix


T./S Matri!

0% Matri!

I Matri!



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Fred R. David

Prentice Hall

Ch 6-18

S&A% Matri!

Strategic &osition an( Action "aluation Matri!

Four +ua(rant 'ramework

Determines appropriate strategies Aggressi"e

%onser"ati"e

De'ensi"e %ompetiti"e


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Fred R. David

Prentice Hall

Ch 6-19

S&A% Matri!

Two Internal Dimensions Financial Strength CFS

%ompetiti"e A("antage C%A

Two !ternal Dimensions n"ironmental Sta)ility CS

In(ustry Strength CIS


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Fred R. David

Prentice Hall

Ch 6-20

S&A% Matri!

."erall Strategic position (etermine( )y:

– Financial Strength CFS

– %ompetiti"e A("antage C%A

– n"ironmental Sta)ility CS

– In(ustry Strength CIS


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Fred R. David

Prentice Hall

Ch 6-21

S&A% Matri!

De"eloping the S&A% Matri!:

• F Matri!• IF Matri!• Financial Strength• %ompetiti"e A("antage• n"ironmental Sta)ility• In(ustry Strength


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Fred R. David

Prentice Hall

Ch 6-22

S&A% Matri!

• Select "aria)les to (e'ine FS9 %A9 S9

7 IS

• Assign numerical ranking 'rom 61

#worst$ to 6@ #)est$ 'or FS an( ISE

Assign numerical ranking 'rom 1

#)est$ to @ #worst$ 'or S an( %A

• %ompute a"erage score 'or FS9 %A9S9 7 IS


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Fred R. David

Prentice Hall

Ch 6-23

S&A% Matri!

• &lot the a"erage scores on the Matri!

• A(( the two scores on the !-a!is an(

plot point on G A(( the scores on the

y-a!is an( plot H &lot the intersection

o' the new !y point

• Draw a (irectional "ector 'rom origin

through the new intersection point


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Fred R. David

Prentice Hall

Ch 6-24

S&A% Factors

n"ironmental Sta)ility #S$

Technological changes

*ate o' in'lationDeman( "aria)ility

&rice range o' competing pro(ucts

0arriers to entry

%ompetiti"e pressure

&rice elasticity o' (eman(

Financial Strength #FS$

*eturn on in"estment

=e"erage=i+ui(ity

/orking capital

%ash 'low

ase o' e!it 'rom market

*isk in"ol"e( in )usiness

External Strategic !ositionInternal Strategic !osition


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Fred R. David

Prentice Hall

Ch 6-25

S&A% Factors

In(ustry Strength #IS$

rowth potential

&ro'it potentialFinancial sta)ility

Technological know-how

*esource utiliation

%apital intensi'y

ase o' entry into market

&ro(ucti"ity9 capacity utiliation

%ompetiti"e A("antage %A

Market share

&ro(uct +uality&ro(uct li'e cycle

%ustomer loyalty

%ompetitions capacity utiliation

Technological know-how

%ontrol o"er suppliers 7 (istri)utors

External Strategic !ositionInternal Strategic !osition


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Fred R. David

Prentice Hall

Ch 6-26

S&A% Matri!

FS

+6

+1

+5

+4

+3

+2

-6

-5

-4

-3

-2

-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

ES

CA IS

Conervative !""reive

De#enive Co$%etitive


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Fred R. David

Prentice Hall

Ch 6-27


S&A% Matri!


T./S Matri!

#$ Matrix

I Matri!



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Fred R. David

Prentice Hall

Ch 6-28

0% Matri!

oston #onsulting $roup Matrix

• nhances multi(i"isional 'irms e''orts

to 'ormulate strategies• Autonomous (i"isions #or pro'it centers$

constitute the )usiness port'olio•

Firms (i"isions may compete in(i''erent in(ustries re+uiring separatestrategy


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Fred R. David

Prentice Hall

Ch 6-29

0% Matri!

oston #onsulting $roup Matrix

• raphically portrays (i''erences among

(i"isions• Focuses on market share position an(

in(ustry growth rate•

Manage )usiness port'olio throughrelati"e market share position an(in(ustry growth rate


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Fred R. David

Prentice Hall

Ch 6-30

0% Matri!

*elati"e market share position (e'ine(:

• *atio o' a (i"isions own market share

in a particular in(ustry to the marketshare hel( )y the largest ri"al 'irm in

that in(ustry


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Fred R. David

Prentice Hall

Ch 6-31

0% Matri!

Dogs

I

%ash %ows

III

Juestion Marks

I

Stars

II

Relative Market Share !osition

%igh&'(

Me)iu*'+(

Lo,('(

I n ) u s t r y S a l e s $ r o ,

t h R a t e %igh

.(

Lo,

-.(

Me)iu*

(


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Fred R. David

Prentice Hall

Ch 6-32

0% Matri!

• Juestion Marks

• Stars

• %ash %ows

• Dogs


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Fred R. David

Prentice Hall

Ch 6-33

0% Matri!

Juestion Marks

• =ow relati"e market share position yet

compete in high-growth in(ustry• %ash nee(s are high

• %ase generation is low

• Decision to strengthen #intensi"e

strategies$ or (i"est


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Fred R. David

Prentice Hall

Ch 6-34

0% Matri!

Stars

• Kigh relati"e market share an( highin(ustry growth rate• 0est long-run opportunities 'or growth an(

pro'ita)ility

•

Su)stantial in"estment to maintain orstrengthen (ominant position• Integration strategies9 intensi"e strategies9 ,oint

"entures


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Fred R. David

Prentice Hall

Ch 6-35

0% Matri!

%ash %ows

• Kigh relati"e market share position9 )ut compete

in low-growth in(ustry• enerate cash in e!cess o' their nee(s• Milke( 'or other purposes

• Maintain strong position as long as possi)le

• &ro(uct (e"elopment9 concentric (i"ersi'ication• I' )ecomes weakLretrenchment or (i"estiture


36/56

Fred R. David

Prentice Hall

Ch 6-36

0% Matri!

Dogs

• =ow relati"e market share position an(

compete in slow or no market growth• /eak internal an( e!ternal position

• Decision to li+ui(ate9 (i"est9 retrenchment


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Fred R. David

Prentice Hall

Ch 6-37


S&A% Matri!


T./S Matri!

0% Matri!

I Matri!

$ran) Strategy Matrix


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Fred R. David

Prentice Hall

Ch 6-38


• &opular tool 'or 'ormulating alternati"estrategies

•

All organiations #or (i"isions$ can )epositione( in one o' 'our +ua(rants

• 0ase( on two e"aluati"e (imensions: – %ompetiti"e position – Market growth


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Fred R. David

Prentice Hall

Ch 6-39

Quadrant IV

1 %oncentric (i"ersi'ication

2 Koriontal (i"ersi'ication

3 %onglomerate(i"ersi'ication

> oint "entures

Quadrant III

1 *etrenchment

2 %oncentric (i"ersi'ication

3 Koriontal (i"ersi'ication> %onglomerate

(i"ersi'ication

? =i+ui(ation

Quadrant I

1 Market (e"elopment

2 Market penetration

3 &ro(uct (e"elopment

> Forwar( integration

? 0ackwar( integration

@ Koriontal integration

%oncentric (i"ersi'ication

Quadrant II

1 Market (e"elopment

2 Market penetration

3 &ro(uct (e"elopment

> Koriontal integration

? Di"estiture

@ =i+ui(ation

R"!I/ M"RKET $ROWT%

SLOW M"RKET $ROWT%

WE"K

#OM!ETITI0E

!OSITIO1

STRO1$

#OM!ETITI0E

!OSITIO1


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Fred R. David

Prentice Hall

Ch 6-40


Jua(rant I

• !cellent strategic position• %oncentration on current markets an(

pro(ucts• Take risks aggressi"ely when necessary


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Fred R. David

Prentice Hall

Ch 6-41


Jua(rant II

• "aluate present approach seriously• Kow to change to impro"e competiti"eness

• *api( market growth re+uires intensi"estrategy


42/56

Fred R. David

Prentice Hall

Ch 6-42


Jua(rant III

• %ompete in slow-growth in(ustries

• /eak competiti"e position

• Drastic changes +uickly

• %ost an( asset re(uction in(icate(#retrenchment$


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Fred R. David

Prentice Hall

Ch 6-43


Jua(rant I

• Strong competiti"e position

• Slow-growth in(ustry

• Di"ersi'ication in(icate( to more promising

growth areas


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S2MM"R3 OF STR"TE$IES

Strategy Options TOWS

*atrix

IE *atrix $SM Total

Integration Strategies

&'For,ar) integration

.'ack,ar) integration

4'%ori5ontal integration 1 1

Intensive Strategies

&'Market penetration

.'Market /evelop*ent

4'!ro)uct /evelop*ent

/iversi6ication Strategies

&'Relate) /iversi6ication 1 1

.'2nrelate) /iversi6ication

4'#onglo*eration /iversi6ication 1 1

/e6ensive Strategies

&'7oint 0enture 1 1

.'Retrench*ent 1 1 1 3

4'/ivestiture 1 1 1 3

8'Li9ui)ation 1 1 2

Fred R. David

Prentice Hall

Ch 6-44

&trate"' (%tion


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DIVERSIFICATION STRATEGY A copoate !tateg" to ente into a ne# $a%et

o in&u!t" #hich the 'u!ine!! i! not cuent(" in)

#hi(!t a(!o ceating a ne# po&uct *o that ne#$a%et+ Thi! i! $o!t i!%" a! the 'u!ine!! ha! no

e,peience in the ne# $a%et an& &oe! not %no#

i* the po&uct i! going to 'e !ucce!!*u(+

Di-e!i.cation !tategie! in-o(-e #i&ening an

ogani/ation0! !cope aco!! &ieent po&uct! an&

$a%et !ecto!+ It i! a!!ociate& #ith highe i!%!

a! it euie! an ogani/ation to ta%e on ne#

e,peience an& %no#(e&ge out!i&e it! e,i!ting

$a%et! an& po&uct!+ Option! ae Related,

Unrelated an& Conglomerate Diversifcation)INTENSIVE STRATEGIESIt i! a !tateg" o* 3aggegation3 o

e,pan!ion un&e #hich go#th i!

achie-e& '" e,pan&ing the !ca(e o*

opeation!+ Thi! !tateg" in-o(-e!

e,pan!ion o* .$4! po&uct ange an&$a%et+ Thee a(tenati-e !tategie! in

thi! ega& ae a! *o((o#!:

• Market Penetration 5 !ee%ing

incea!e& $a%et !hae *o pe!ent

po&uct! in pe!ent $a%et!

• Market Development 5 into&ucing

pe!ent po&uct! in ne#

geogaphic aea!

INTEGRATIVE STRATEGIES6!e& in 'u!ine!! ae -etica( integation)

hoi/onta( integation an& *unctiona(

integation+ In vertical integration) aco$pan" i! conto((ing the up!tea$

an&7o &o#n!tea$ e(e$ent! in thei

!upp(" !tea$+ 6p#a& to !upp(ie! #hi(e

&o#n#a& to 'u"e!+ Horizontal

integration in-o(-e! a co$pan"

e,pan&ing into o acuiing &i-e!i.e&

po&uct (ine!+ Functional integration i! a

$a%eting appoach in #hich an

inteconnecte& an& e,pan&ing !"!te$ o*

!e-ice! an& po&uct! incea!e!

cu!to$e ent" point!) paticipation an&

'an& (o"a(t".

DEFENSIVE STRATEGY

A managementtapproach designed to reduce

the risk of loss. There are two approaches: The

rst approach is aimed at blocking

competitors who are attempting to take over

part of your business's market share. Cutting theprice of your products, adding incentives or

discounts to encourage customers to buy from

you or increasing your advertising and

marketing campaigns are the best common

ways of going about this. The second approach

is new product innovations, plan a company

epansion by opening a new chain or reconnectwith old customers to encoura e them to bu

&trate"' (%tion


46/56

Fred R. David

Prentice Hall

Ch 6-46


Juantitati"e Strategic

&lanning Matri!

#JS&M$

Stage 8:The Deci!ion Stage


47/56

Fred R. DavidPrentice Hall

Ch 6-47

JS&M

Juantitati"e Strategic &lanning Matri!

• .nly techni+ue (esigne( to (etermine therelati"e attracti"eness o' 'easi)le

alternati"e actions


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Ch 6-48

JS&M


• Tool 'or o),ecti"e e"aluation o'alternati"e strategies

• 0ase( on i(enti'ie( e!ternal an(

internal crucial success 'actors• *e+uires goo( intuiti"e ,u(gment


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Ch 6-49

JS&M


• =ist the 'irms key e!ternal opportunities 7threatsE list the 'irms key internal strengthsan( weaknesses

•

Assign weights to each e!ternal an( internalcritical success 'actor


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Ch 6-50

JS&M


•

!amine the Stage 2 #matching$ matricesan( i(enti'y alternati"e strategies that the

organiation shoul( consi(er implementing

• Determine the Attracti"eness Scores #AS$


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Ch 6-51

JS&M


• %ompute the total Attracti"enessScores

•

%ompute the Sum Total Attracti"enessScore

JS&M St t i Alt ti


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Ch 6-52

JS&M

9e" Intena( Facto!

!anagement

!arketing

"inance#Accounting

$roduction#%perations

&esearch andevelopment

Computer (nformation)ystems

)trategy *)trategy+

)trategy

-eight9e" E,tena( Facto!

conomy

$olitical#/egal#0overnmental

)ocial#Cultural#emographic#nvironmental

Technological

Competitive

Strategic Alternatives

JS&M


53/56


Ch 6-53

JS&M

Li*itations:

• *e+uires intuiti"e ,u(gments an(e(ucate( assumptions

• .nly as goo( as the prere+uisite inputs

JS&M


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Ch 6-54

JS&M

!ositives:

• Sets o' strategies e!amine( simultaneouslyor se+uentially

• *e+uires the integration o' pertinent e!ternal

an( internal 'actors in the (ecision-makingprocess

%ultural Aspects o' Strategy


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Ch 6-55

%ultural Aspects o' Strategy

%hoice

%ulture:

• The set o' share( "alues9 )elie's9

attitu(es9 customs9 norms9

personalities9 heroes9 an( heroines that(escri)e a 'irm

PORTER’S 5 FORCES


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Evalating In!str" Envir#n$ent

strat mgt analytical framework

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